Credit Problems Squeeze Retailers, Too

Third of a five-part series

U.S. Store Closings

A selected list of major recent retail closings:

 

• Foot Locker: 274 stores in 2007

• Ann Taylor Stores: 117 stores by 2010

• Zales: 100 stores

• Wilsons Leather: 158 stores

• Talbots: 78 Talbots kids' and men's stores by September

• Pacific Sunwear: 154 demo clothing stores

• CompUSA: 103 stores

• Bombay Co.: all 388 of its remaining stores

• Sharper Image: 96 stores

• Levitz Furniture: all 76 of its stores

 

Sources: Company statements and news reports.

A record 7,000 U.S. stores could close this year, a retail analyst predicts, citing cuts in consumer spending and retailers' struggles to borrow money and fend off competition.

"We've got a very difficult situation in the retail business," says Howard Davidowitz, an independent analyst in New York. Several retail chains have filed for bankruptcy protection and another 15 or so are "on the edge," he says.

Retailers' debt jumped 30 percent in the past year, Davidowitz says.

"Just like consumer debt is up, corporate debt is up," he says. "Everybody's debt is up. It's a real danger."

Amid a tight credit market and banks suffering from the subprime mortgage mess, retailers are having trouble borrowing. Many retailers routinely use debt to finance their inventories, but that lifeline is harder to come by, Davidowitz says.

"This is a terrible time to be dependent on bank debt and be in trouble because the banks will be unmerciful...." he says. "There are many retailers out there ... who maybe could operate OK if they got some forbearance, but it's a terrible time to be dependent on bank debt."

Other factors are working against retailers. "Americans are spending less," Davidowitz says. "They've got the highest debt they've ever had." And consumers are spending more for food and energy, leaving less for discretionary purchases.

And, he says, "We have too many stores."

"We have 19 1/2 square feet [of retail space] for every man, woman and child in this country," Davidowitz says, suggesting that's nearly double what is needed.

Chains from Foot Locker to CompUSA have shuttered stores in the past year. In 2007, 4,500 stores folded, according to Davidowitz.

"Almost everybody closed because of too much competition," he says. "What happened? Wal-Mart came along and closed them down. The consumer made a choice to choose Wal-Mart. The prices were lower, the stores were bigger...."

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

Support comes from: