A weak holiday season and a struggling economy led retailers Sharper Image and Lillian Vernon Corp. to file for bankruptcy this week, and...
NEW YORK — A weak holiday season and a struggling economy led retailers Sharper Image and Lillian Vernon Corp. to file for bankruptcy this week, and analysts predict others could soon follow them as consumer spending worsens.
“You’ll see a record number of bankruptcies over the next 50, 100 and 1,000 days,” said Burt Flickinger III, managing director of retail consulting firm Strategic Resource Group.
Both Sharper Image, known for its high-tech novelty gadgets, and Lillian Vernon, which sells low-cost gifts and gadgets through its catalog and Web site, have long been plagued with falling sales. But retailers across the sector have been laying off staff and closing stores as consumers cut back on discretionary spending.
The International Council of Shopping Centers projects that 5,770 stores could close in 2008, the largest number since 2004. Retailers as a whole reported their worst January same-store sales in almost four decades.
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Flickinger said the problem is partly food and fuel inflation. While consumers used to pay 10 cents of every dollar for food and fuel, they now pay up to 20 cents per dollar.
Retail analyst Patricia Edwards of Wentworth Hauser and Violich said that while Sharper Image and Lillian Vernon were the “weak links in the herd,” others are likely to follow as things weaken — or seem to do.
“Even if we never hit a classical recession, the consumer is in a recession,” she said. “It may just be a mental recession, but as long as people are feeling fear, they’re not going to spend the way they did before.”
In an affidavit filed with the U.S. Bankruptcy Court for the District of Delaware, Sharper Image Chief Financial Officer Rebecca Roedell said the company has experienced declining sales since 2004 and recorded net losses from fiscal 2005 into 2008.
San Francisco-based Sharper Image plans to close 90 of its 184 stores as soon as possible after it sells their inventories.
It plans to continue to conduct business as usual while it develops a reorganization plan.
Telephone calls to the company about plans for Sharper Image outlets in downtown Seattle, Bellevue Square and Alderwood mall were not immediately returned Wednesday.
Meanwhile, Lillian Vernon Chief Financial Officer Robert Eveleigh said in an affidavit Wednesday that the company, which has a highly cyclical business that peaks during the Christmas holidays, has experienced declining sales and rising costs over the past decade.
The company is evaluating whether it is in the best interest of its shareholders to sell itself or liquidate.
Both companies had recently tried management changes and other moves to help results.
Lillian Vernon, meanwhile, laid off half its year-round work force.
Sharper Image shares lost $1.05, or 72.9 percent, to 39 cents, and hit an all-time low of 29 cents at one point during the day. Lillian Vernon is not publicly traded.