Gottschalks Sinking Fast; Filene’s Basement in Trouble

Gottschalks

Yikes. They only just announced a Chapter 11 filing last week, but Gottschalks is on the fast track to oblivion. Inside Bay Area notes that Gottschalks needs a buyer now “or else:”

Gottschalks Inc. intends to find a buyer by mid-March or it might proceed with a complete liquidation of its assets, according to court papers filed by the bankrupt department store operator.

The retailer, whose operations include department stores in Antioch, Stockton, Tracy, Santa Rosa and Capitola, said it hopes to complete an auction by March 17 that would lead to a sale of the company. Fresno-based Gottschalks operates primarily in malls located in suburban and rural markets in California, Washington, Oregon, Nevada, Idaho and Alaska.

Absent a buyer, Gottschalks would move toward a liquidation during the spring, company filings with the U.S. Bankruptcy Court in Delaware shows.

Like I said the other day, poor Gottschalks has seemed like a weaker player for some time. Their stores are like relics from another era, straddling a funny line between Kohl’s and Macy’s and with locations in rural malls and second-tier markets. Their loss would be a very major one for many malls in smaller western markets.

At the same time, Filene’s Basement is closing 11 stores with leases they were apparently unable to negotiate. This may be a bad sign for the overall health of the once-storied chain. Filene’s Basement has been close to the brink before in the late ’90s after a zealous overexpansion and a dilution of their brand equity, after opening scores of suburban stores that were too similar to TJMaxx, Marshalls, and Ross to differentiate. The smaller chain retrenched of late, however, and began to trend upscale by offering high-end designer goods at significantly marked down prices; a nod to its beginnings as the clearance basement under the original flagship Filene’s store in Boston. That store, which is notable for hosting its annual “running of the brides” bridal clearance event, has been closed for several years while the site is being redeveloped. Many in Boston wonder if it will ever re-open, and this latest news seems to cast even more doubt on the prospect.

Coming soon: a post about a mall that actually has a Gottschalks in it! Neat!

Unsurprising Announcements: Say Goodbye to Circuit City, Gottschalks Teeters

Curbed-style Circuit City graphic

As expected, 2009 is bringing a massive wave of retail bankruptcies. Today brings news of the biggest yet: Circuit City will be closing all of their stores and winding down their business between now and March 31. This will leave Best Buy as the only national electronics retailer, with only a few regional (or much smaller, like Fry’s) competitors. Over 30,000 people will lose their jobs.

Given the relative ease of finding electronics online–a fairly commoditized good–CC’s weakness compared to Best Buy, and the vastly superior options offered by smaller, speciality chains (Fry’s Electronics, Micro Center), it’s surprising it took Circuit City so long to reach this point. For many years, Circuit City has offered a fairly poor store experience, with showrooms that feel trapped in the ’80s and offer limited selections. There was a time, not much more than ten years ago, when Circuit City’s commission-based sales staff was fairly knowledgeable, and Circuit City offered decent selections in certain verticals (their music selection was, until the late 1990s, amongst the best amongst general merchandise retailers). Apart from a few ingenious moves, such as an online feature that allowed you to reserve a product in a local Circuit City store and pick it up within 24 minutes–a great treat when you’re looking for a hard-to-find item–Circuit City hasn’t for many years looked like the behemoth it was when expanding across the country in the ’80s and ’90s, crushing smaller regional competitors like Lechmere in its wake.

Trouble started to appear in early 2007, when the economy was still quite strong. Circuit City made the famously insensitive move of targeting well-paid, highly trained, senior sales staff for layoffs, and then ineptly watched as the move was made public. A lesson here, guys: when your competition is the internet–a place without any sales staff at all–then don’t toss out your differentiating factor. Not only was it a devastatingly embarassing public relations move, but it was also the wrong strategy.

Also, Gottschalks, one of the last of the old-line department stores not called Macy’s, Sears, Penney’s, or Dillard’s, has filed for Chapter 11 bankruptcy protection. The famously dowdy Fresno-based retailer is one that we’ve had our eye on for awhile because their stores seem like relics from another era. Their merchandise mix is not especially contemporary when shoppers have been turning away from stores like these for years. So far, no announcements of store closings but watch them to come down the line. The loss of Gottschalks would deliver a painful blow to many small-town and second-tier western malls, especially in California’s central valley. In some cases, Gottschalks is the primary (or lone) remaining anchor for some of these malls (including at least one or two that I’ll be posting soon!)

Other bankruptcies this week include Against All Odds and Shane Co. jewelers.

Macy’s Closing 11 Stores; Goody’s Says Goodbye Forever

Macy's in Madison, WI which is NOT closing

Macy’s, like many other stores in the country, didn’t make it through the holiday season with a surplus of cash; in fact, Macy’s has emerged from the holiday season – a time when many stores report up to 50 percent of annual sales – badly beaten and in need to purge some of its stores.  The following 11 locations will begin closing sales immediately:

  1. Bellevue Center, Nashville, TN.  Former Hecht’s.
  2. Ernst & Young Plaza (7+Fig), Downtown Los Angeles, CA.  Former Robinson May.
  3. The Citadel, Colorado Springs, CO.  Former Foley’s.
  4. Westminster Mall, Westminster, CO (Denver area).  Former Foley’s.
  5. Palm Beach Mall, Palm Beach, FL.  Former Burdine’s.
  6. Mauna Lani Bay Hotel, Big Island of Hawaii*
  7. Lafayette Square, Indianapolis, IN.  Former L.S. Ayres.
  8. Brookdale Center, Brooklyn Center, MN (Minneapolis area) Former Dayton’s and Marshall Field’s.
  9. Crestwood Court (Formerly Crestwood Plaza), St. Louis, MO.  Former Famous Barr.
  10. Natrona Heights Plaza, Natrona Heights, PA (Pittsburgh area).  Former Lazarus.
  11. Century III Mall Furniture and Clearance Center, West Mifflin, PA (Pittsburgh area).  Former Kaufmann’s.

* What on earth?!  Macy’s was in a hotel?  It must have been small, as it only had 3 employees.  Was this a Liberty House that Macy’s “inherited” in the 2001 acquisition of that store, I wonder?

This news most certainly isn’t welcome for many of the centers listed above, as they are teetering on becoming dead malls or are already there.  Losing Macy’s will almost certainly put some of them on life support or will cause them to close outright. 

Also, note that every store, with the exception of the hotel store, was a May company regional nameplate which got eaten by Macy’s in 2005-2006.  Count on Macy’s and many other chains to continue to “trim the fat” and eliminate underperforming locations of stores this year in order to stay afloat.  Hopefully, Macy’s didn’t bite off more than it could chew with the enormous May acquisition coming so soon before a major economic recession.      

Goody's Goody's

In other retail news, Goody’s Family Clothing, a Knoxville, Tenn. based chain of over 380 anchor and mini-anchor sized stores in the Southern and lower Midwest states is closing all of its stores for good.  This news sadly comes as the first liquidation of 2009, but don’t look for it to be the last.  Liquidation sales should begin by January 9, 2009, and wind down by April 1st.  These closures are definitely more powerful and far-reaching than the Macy’s closures, as many malls and power centers throughout the south are either anchored by or contain a Goody’s store.  Not good-y. 

goodys.gif

While the Economy Was Crumbling…

store-closing.jpg

I didn’t live through the Great Depression, but none of the seniors who did told me we’d be losing all of our chain stores! Sheesh…

We already know about Mervyn’s and Linens N Things, but I dropped the ball on reporting on a few others, such as:

Value City:

The ailing Value City Department Stores chain has filed for bankruptcy protection as it prepares to shutter its stores.

The company filed the Chapter 11 application Sunday in U.S. Bankruptcy Court’s Southern District of New York, asking the court to approve an agreement with liquidation firm Tiger Capital Group LLC to conduct closing sales at “substantially all” of its stores.

National Wholesale Liquidators:

National Wholesale Liquidators Inc., a family-owned discount retailer, sought bankruptcy protection from creditors without giving a reason…

The company, founded in 1984, carries more than 120,000 items including brand-name closeouts. Its more than 50 stores are located in suburban shopping plazas in 10 states including New York, New Jersey and Pennsylvania. The retailer forgoes “fancy” store fixtures to keep prices low, according to its Web site.

Circuit City (We called this one):

Circuit City Stores, the nation’s second-largest consumer electronics retailer, said yesterday that tightened credit and rapidly declining consumer spending have forced it to file for bankruptcy protection, underscoring the perils facing retailers as they head into the crucial holiday season during the worst economic crisis in a generation.

The season generally accounts for about 20 percent of all retail sales, providing the cash that stores use to pay for merchandise ordered on credit earlier in the year. But as Circuit City’s troubles mounted, its suppliers feared that it would not be able to pay its bills.

Perhaps most dramatically, General Growth Properties–one of the nation’s largest mall operators–is facing default:

General Growth Properties Inc. shares plummeted Tuesday after the mall owner warned it faces solvency trouble and may be forced to file for bankruptcy if it can’t refinance or extend nearly $1 billion in debt due next month.

The real estate investment trust, which is the nation’s second-largest mall owner whose big-name holdings include Chicago’s Water Tower Place and Fashion Show in Las Vegas, also disclosed in a regulatory filing late Monday that it may default on certain debt obligations.

And although it’s not yet bankrupt, there was this sad dispatch from Boscov’s, longtime a favorite here at Labelscar:

Al Boscov admits his bid to regain control of the department store chain named after his family is the final hope for the bankrupt retailer’s survival.

“We have to sort of pull off a little bit of a miracle,” Mr. Boscov said Wednesday. “If I can’t raise all the money, the only thing you would have is liquidation.”

Given that this retail bloodbath is coming just before the Christmas season, I am really terrified to see who will follow these companies into the abyss after the holidays are over. That’s typically when most struggling companies throw in the towel, since they hope that the Christmas sales will put them back on track. Remember when companies like Bradlees, Montgomery Ward, Apex, and Ann & Hope all shut at the same time in early 2001? We may see even worse this time around.

I’m running out of obvious guesses for impacted large-format retailers, but I think we may see at least one office chain run into trouble (Office Max seems the weakest), and I think more of the smaller remaining regional chains (Gottschalks, you frumpy old mess, I’m lookin’ at you!) will run into serious trouble. Other chains that long ago lost a strong value proposition (Dillard’s) may find themselves in a fair amount of trouble, and verticals with several comparable strong players (a la L’N’T and Bed, Bath, & Beyond) may wind up shedding some chains (PetSmart or Petco? Borders or Barnes & Noble?). And of course, there’s always Kmart/Sears, but if there’s one that would spell catastrophe for our nation’s malls, it’s that one.

Circuit City to Slash 155 Stores, Value City is Done

Curbed-style Circuit City graphic

We called it: Circuit City is closing 155 stores, not even waiting to see if holiday sales have a chance of propping up the 700-store chain. This is a very bad sign; I’d look to see if Circuit City is one of the titans to fall in January. Consumerist has the complete list of stores to close. The cuts are heavy in Georgia, Arizona, California, Illinois, and Ohio, and they’re scooting out of some markets entirely. Surprisingly, the Northeast is largely spared with only one store in New England to shut and relatively few in the New York City metropolitan area.

Bloomberg:

The company has posted six straight quarters of falling sales. Circuit City hired FTI Consulting Inc. and replaced its chief executive officer in September after losing customers to Best Buy Co. and Wal-Mart Stores Inc. Circuit City is closing stores in 55 metro areas and will exit 12 of those markets altogether, including Atlanta, Phoenix and Kansas City, Kansas.

Circuit City is closing stores that contributed $1.4 billion in revenue last year, an average of about $9 million per store. Average revenue per U.S. store last year was about $16 million. The retailer, founded in 1949, has struggled with older stores in less desirable locations.

“Since late September, unprecedented events have occurred in the financial and consumer markets causing macroeconomic trends to worsen sharply,” CEO James Marcum said in the statement. “The weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendors.”

Circuit City tried to sell itself in May after Blockbuster Inc. made a preliminary offer that was later withdrawn. It fired higher-paid workers and opened smaller stores to cut costs. Until the shift to smaller stores, Circuit City’s strategy had been to sell in locations as large as 44,000 square feet.

In the meantime, we missed the story last week but the long-beleaguered Value City department store chain will be closing all of their remaining locations. Frankly, this one seems overdue; Value City’s dowdy, confusing fleet of stores always felt like a relic from the ’70s, and they long ago lost any specific value proposition. Frankly VC has been a weaker player than even Kmart (or even the more-comparable Mervyn’s) for a long time. Economic downturns like this one tend to clear out the deadwood first, and it’s hard to define Value City as much else.

Interestingly, Value City’s closing will have a heavy impact on some marginal shopping malls. The Shore Mall near Atlantic City is one that comes to mind, as does the Fairlane Village Mall in Pottsville, Pennsylvania: the center is anchored by only Value City and Boscov’s, two troubled chains.

Another Sad Day for Retail: Boscov’s Flails for Life; Dawahare’s Shutting For Good, Trouble for Goody’s and Bob’s

Whoa. just when we thought it couldn’t get much worse than Mervyn’s, one regional chain is throwing in the towel and three others are struggling badly. The big news, surrounding northeastern department store Boscov’s, is fresh from this morning:

About half the major suppliers to Boscov’s, a family-held Reading, Pa.-based department store with stores across the mid-Atlantic, have halted merchandise shipments for lack of payments, The New York Post reported Friday, citing unnamed sources.

PlainVanillaShell has more, reporting that the 97-year-old, family-owned chain is nearing collapse. Boscov’s has stores stretching from Virginia to New York, with the bulk of their locations in Pennsylvania and New Jersey.
Dawahare's Logo

Meanwhile, Dawahare’s, a small, storied retailer with stores in Kentucky and West Virginia, announced this week that they will shut all of their 31 stores, many of them located in small Appalachian cities and towns hit hard by a poor economy.

Goody’s, a Tennessee-based retailer of family clothing with locations primarily in the southeast, has also filed for Chapter 11 bankruptcy and is closing 69 of their 355 stores.

bob's stores logo

And last but not least, long-troubled Bob’s Stores, a Connecticut-based chain of mid-priced casual clothing stores owned by TJX, has been put on the market. TJX acquired them in 2003 when the original, independent Bob’s Stores chain went bankrupt, but has been unable to turn them arond.

The Next Domino to Fall: Mervyn’s?

Mervyn's

Mervyn’s, a large western chain of discount clothing/housewares retailers–very similar to Kohl’s, for those of you in other parts of the country–may well be the next major bankruptcy to hit American malls:

Mervyn’s LLC may be forced to file for Chapter 11 bankruptcy protection as early as this month if the California department-store chain fails to persuade its suppliers to ship products for the back-to-school season, according to a published report.

Some of Mervyn’s vendors have stopped shipping to the company, with its access to financing pulled by some key lenders, according to The Wall Street Journal. The company may be forced to shut its 177 stores in seven states, the paper said.
Mervyn’s is a major mall anchor in western states, and particularly in California. A Mervyn’s bankruptcy would create a large amount of vacant real estate that would be very difficult to fill.

Hudson’s Bay Co. bought by Lord & Taylor parent

Recently, 338-year-old Canadian retail giant Hudson’s Bay Company, which operates numerous chain nameplates such as discounter Zellers and The Bay department stores, received a takeover bid from U.S. retailer Lord & Taylor.  Already a minor shareholder in Hudson’s Bay Company, Lord & Taylor wouldn’t be the first American company to own this brand; the company is already owned by American Anita Zucker, whose late husband, Jerry, gained control of the company in 2006. 

On July 16, the sale was complete, and Hudson’s Bay is now part of the Lord & Taylor fold.  Now that Lord & Taylor has a more impressive foothold in North America, what – if anything – do you think will happen to the Hudson’s Bay name?  Will it float off into the ether like other venerable brands have over the years – Marshall Field’s, Filene’s, McAlpin’s – just to name a few – or will Lord & Taylor realize the brand has enough equity to keep it afloat? 

I, personally, wouldn’t want to see the Hudson’s Bay name disappear across Canada, but what I think hasn’t stopped retailers from shifting and consolidating nameplates in the U.S.  I think many people are still miffed about what Macy’s did over the past few years, taking away many regional banners and creating a “unified” Macy’s across the entire United States.  Was it worth it for them?  Time will tell, but the very reasons they used for unifying their holdings have been sort of left by the wayside, with separate, more upscale Macy’s locations popping up in certain places and not others.  The issue is probably more weighty in some places rather than others, too; for example, Chicago’s affinity for Marshall Fields has probably cost Macy’s more money and loyalty than the regional banners in other areas, but who can be so sure?  Only time will tell.

Jasmine Sola: Rip Her To Shreds

Jasmine Sola Store

There’s an interesting article in today’s Boston Globe about the impending demise of Jasmine Sola, a trendy, upscale women’s clothier that had until recently been on a meteoric rise. The story details how Jasmine Sola went from a carefully-curated boutique in Cambridge, Massachusetts to a booming regional chain known for its colorful stores and high-end (yet young-skewing) merchandise before being sold to New York and Company, who in only two years managed to overexpand and destroy the chain’s merchandise mix. The way they neglected to cater their merchandise mix to individual markets is also somewhat reminiscent to many of the complaints about the national strategy employed by Macy’s:

“Manganella, an Italian immigrant who started Jasmine in 1970 with a $2,500 loan from his mother, had relied on instinct, not science or financial spreadsheets. He learned about women’s clothing from his mother and sister, both seamstresses, and developed a keen sense of style. At Jasmine, named after the flower, he had given space to unknown designers, which made his boutique a fashion icon for teens and twentysomethings…

“Meanwhile, New York & Co. began changing the formula that made Jasmine a success, narrowing the number of brands offered, buying lower-end merchandise, and opening bigger stores. New York & Co. started outfitting all Jasmine stores with the same amount and type of items, eliminating another of Manganella’s innovations: merchandise tailored for each store, with lower-priced clothes for the college students shopping at Harvard Square, and higher-end clothes for Newton and Wellesley.

“The change meant a new Miami store received chunky sweaters and corduroy pants in the middle of the summer – the same back-to-school items Northeast stores featured, according to Liza Baird, who had worked at local Jasmine stores, and moved to Miami in April 2006 to open the first Jasmine shop in Florida. Sales were so poor, Baird said, that some days the store barely broke $1,000.”

There’s also quite a bit about the dispute between New York and Company and Jasmine Sola founder Luciano Manganella, who was fired after allegations of sexual harassment.

Jasmine Sola is just one of the retail closures we’re seeing this Christmas season, along with Levitz Furniture and CompUSA. KB Toys also announced a wide swath of store closures, which raises speculation that the chain may be history once the holiday season draws to a close.