Twenty-Six Percent Retailers in Financial Distress; in Danger of Bankruptcy

Retailers brace for major change

The good news for retailers reeling from the holiday sales season is that 2008 is almost over. The bad news: The fallout in 2009 could be worse.

This year’s retailing slide — when stores were forced to cut prices to convince wary consumers to spend — promises to have a lasting impact on the way the retail industry operates. Many retailers are rethinking how they do business, as others prepared for a large number of bankruptcies and store closures.

The first retail casualty of the weak holiday season could be Goody’s Family Clothing Inc., a Southeast apparel retailer. The 287-store chain emerged from bankruptcy court in October but its holiday sales were below plan and financing it was counting on didn’t materialize, according to a person familiar with the situation. The retailer is negotiating with lenders to avoid potential liquidation, say two people familiar with the matter.

A representative for Goody’s was unavailable to comment. But in October, Chief Executive Paul White was upbeat about its prospects, saying “we are energized by the opportunity in front of us and are focused on continuing to fulfill the Goody’s mission.”

Other retailers are saying they will trim inventory and reduce the number of suppliers. That, in turn, will cause a ripple effect, prompting a number of weaker manufacturers, small brands and underfunded fashion labels to fail. New retail formats and concepts stores are likely to be curtailed in the coming year. And luxury-goods makers already are working to cut the long lead times between orders and store delivery as a way to reduce risk.

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3 responses to “Twenty-Six Percent Retailers in Financial Distress; in Danger of Bankruptcy

  1. If they’re cutting so low … couldn’t it mean that they’ve been overpricing throughout all these years ?!!!

  2. they’re certainly overpricing when considering how little most of the goods are purchased for – sweatshop laborers work long hours for short pay.

  3. And to think that Republicans are lavishly attempting to extort from us the acceptance of sweat-shop working conditions …

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