The consumer-spending slump and tightening credit markets are triggering a wave of bankruptcies in retailing, prompting thousands of store...

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The consumer-spending slump and tightening credit markets are triggering a wave of bankruptcies in retailing, prompting thousands of store closings that are expected to remake suburban malls and downtown shopping districts across the country.

Since last fall, eight mostly midsize chains — as diverse as the furniture store Levitz and the electronics seller Sharper Image — have filed for bankruptcy protection as they staggered under mounting debt and declining sales.

But the troubles are quickly spreading to bigger companies, like Linens ‘n Things, the retailer with 500 stores in 47 states. It may file for bankruptcy as early as this week, according to people briefed on the matter.

Even retailers that can avoid bankruptcy are shutting down stores to preserve cash through what could be a long economic downturn. During the next year, Foot Locker will close 140 stores, Ann Taylor will shutter 117 and jeweler Zales will close 100.

The surging cost of necessities has led to a belt-tightening among consumers. Figures released Monday showed that spending on food and gasoline is crowding out other purchases, leaving people with less to spend on furniture, clothing and electronics.

Thus, chains specializing in those goods are vulnerable.

Retailing is a business with big ups and downs during the year. Retailers rely heavily on borrowed money to finance their purchases of merchandise and even to meet payrolls during slow periods.

Yet the nation’s banks, struggling with the growing mortgage crisis, have started to balk at extending new loans, effectively cutting up the retail industry’s collective credit cards.

“You have the makings of a wave of significant bankruptcies,” said Al Koch, who helped bring Kmart out of bankruptcy in 2003 as interim chief financial officer and now works at a corporate turnaround firm, AlixPartners.

“For years, no deal was too ugly to finance,” he said. “But now, nobody will throw money at these companies.”

Because retailers rely on a broad network of suppliers, their bankruptcies are rippling across the economy.

Cash-strapped chains are leaving behind tens of millions of dollars in unpaid bills to shipping companies, furniture manufacturers, mall owners and advertising agencies. Many are unlikely to be paid in full, spreading the economic pain.

When it filed for bankruptcy, The Sharper Image owed $6.6 million to United Parcel Service. Levitz owed Sealy $1.4 million.

And it is not just large companies that are absorbing the losses. When Domain, the East Coast furniture retailer, filed for bankruptcy, it owed about $30,000 to On Time Express, a 90-employee transportation and logistics company in Tempe, Ariz.

“We’ll be lucky to see pennies on the dollar, if we see anything,” said Ross Musil, the chief financial officer of On Time Express.

Most of the ailing companies have filed for reorganization, not liquidation, including the furniture chain Wickes, the housewares seller Fortunoff, Harvey Electronics and the catalog retailer Lillian Vernon. In a contrast with previous recessions, many are unlikely to emerge from bankruptcy, experts said.

Changes in the federal bankruptcy code in 2005 significantly tightened deadlines for ailing companies to restructure their businesses.

And those changes may force companies to pay suppliers before paying wages or honoring obligations to customers, such as redeeming gift cards, said Sally Henry, a partner at Skadden, Arps, Slate, Meagher & Flom and the author of several books on bankruptcy.

As a result, she said, “it’s no longer reorganization or even liquidation for these companies. In many cases, it’s evaporation.”

Several retailers that filed for Chapter 11 bankruptcy protection over the past eight months, like the furniture sellers Bombay, Levitz and Domain, have largely ceased to operate — closing stores, laying off staff and liquidating.

In most cases, the collapses stemmed from a combination of factors: flawed business strategies, a souring economy and banks’ unwillingness to issue cheap loans.

Bombay, a chain with 360 stores including locations at Southcenter and Bellevue Square, was considered a success in the furniture world, after its sales surged from $393 million in 1999 to $596 million in 2003.

Then the chain decided to move most of its stores from enclosed malls to open-air shopping centers. It started a children’s furniture business and began carrying bigger items, like beds, with higher prices than its regular furniture.

Consumers balked, hurting Bombay’s sales and profits at the same time its expenses for the ambitious new strategies began to grow. The timing was unenviable: By early 2007, the housing market began to falter, so purchases of furniture slowed to a trickle.

The company was running out of money, but Bombay’s banks refused to lend more. “They did not want to take the chance that we might not repay the loans,” said Elaine Crowley, chief financial officer.

In September, Bombay filed for bankruptcy protection. The highest bid for the company came from liquidation firms, which quickly dismembered the 33-year-old chain.

Once employing 3,608, Bombay has 20 employees left.

The bankruptcies are putting a spotlight on a little-discussed facet of retailing: heavy debt.

Stores may appear to mint money by paying $2 for a T-shirt and charging $10 for it. But because shopping is based on weather patterns and fashion trends, retailers must pay for merchandise that may sit, unsold for long periods.

So chains regularly borrow large sums to cover routine expenses, like wages and electricity bills. When sales are strong, as they typically are during the holiday season, the debts are repaid.

Fortunoff, a jewelry and home-furnishing chain in the Northeast, relied on $90 million in loans to help operate its 23 stores, using merchandise as collateral.

But by early 2008, as the housing market struggled, the chain’s profits dropped, meaning its collateral was losing value.

In better economic times, the banks might have granted Fortunoff a reprieve. But with a recession looming, they refused, forcing it to file for bankruptcy in February.

In filings, the chain said it was “facing a liquidity crisis.” (Fortunoff was later sold to the owner of Lord & Taylor.)

Plenty of retailers remain on strong footing. Arnold Aronson, the former chief executive of Saks Fifth Avenue and a managing director at Kurt Salmon Associates, a retail consulting firm, said the credit crunch and consumer slowdown have only wiped out the “bottom tier” companies.

“This recession dealt the final blow to these chains,” he said.

But several big-name chains are looking vulnerable. Linens ‘n Things, owned by Apollo Management, a private-equity firm, is considering a bankruptcy filing after years of poor performance and mounting debts, though it has additional options, people involved in the discussions said Monday.

Whether more chains file for bankruptcy or not, it will be hard to miss the impact of the industry’s troubles in the nation’s malls.

J.C. Penney, Lowe’s and Office Depot are scaling back or delaying plans for expansion. Office Depot had planned to open 150 stores this year. Now it will open 75.

The International Council of Shopping Centers estimates there will be 5,770 store closing in 2008, up 25 percent from 2007, when there were 4,603.

Charming Shoppes, which owns women’s clothing retailers Lane Bryant and Fashion Bug, is closing at least 150 stores. Wilsons The Leather Experts will close 158. And Pacific Sunwear is shutting down a 153-store chain called Demo.

Those decisions were made months ago, when it was unclear how long the downturn might last.

If March was any indication, it is nowhere near over. Sales at stores open at least a year fell 0.5 percent, the worst performance in 13 years, according to the shopping council.