Friday, October 17, 2008

Where Are All The People Going to Buy Their Crap?

Another big retailer is about to liquidate itself and close up shop for good:
Mervyns' announcement marks the latest retail obituary and represents yet another blow to the nation's malls, which are grappling with increasing vacancy rates in a deteriorating economic environment. On Tuesday, specialty retailer Linens 'n Things, which filed for bankruptcy protection in May, announced it will begin liquidation sales at its stores as early as this week after failing to find a buyer that wanted to operate the company.


The big problem with Mervyns, a 59-year-old chain, was that it had been squeezed between high-end department stores and discounters like Wal-Mart Stores Inc. Before its bankruptcy filing, Mervyns had been shuttering stores and leaving states such as Oregon and Washington since 2005, after a consortium of private equity players including Sun Capital Partners Inc. bought Mervyns from Target Corp. for $1.2 billion.

In April, Mervyns appointed Goodman, who had been president and general manager of the Dockers brand - a key supplier to Mervyns - as president and chief executive. But the chain's heavy concentration in California has made a turnaround harder.

Last month, Mervyns sued the private equity firms involved in the leveraged buyout of the chain from Target, alleging the deal stripped the retailer of its real estate assets, forcing it into bankruptcy.

Mervyns said in the suit that the investment group, which included Cerberus Capital Management and Sun Capital Management, bought Mervyns in 2004, acquired its real estate and leased it back to the company at substantially increased rates. Mervyns says the increased rent was used to finance the buyout.
I cannot be certain if it was the economy or if it was your typical boneheaded business decisions. Seeing big retailers go out of business isn't new, but what's different during this economic downturn is the speed at which they are collapsing before even attempting to stay open through the Christmas retail season. I suspect quite a few store chains are going to disappear in 2009, especially music and book stores, as well as specialty retailers.

Wal-Mart is here to stay, sir. Get your Slim Jims and your Mr. Pibb whilst you can. Your bad is my good--when all of the good stores are gone, there will be nothing left but the low end and the very high end, where I will be, purchasing binoculars so that I can see your fat ass coming from six miles away.