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A Rash of Retailers About to Go Bankrupt

Debt, trimmed consumer spending push retailers to brink

By Jim O'Neill,  Newser User

Posted Jan 12, 2009 8:36 AM CST
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(Newser) – Look for a wave of retailers going bankrupt in the months ahead, reports the Wall Street Journal, as dismal holiday sales take their toll on a business sector that's weak from expanding too fast and taking on too much debt. Lenders who traditionally have supported the segment are pulling back, demanding tougher terms and cutting back on their lending as they attempt to bolster their own weak bottom lines.

Among the vulnerable: Claire’s Stores, department store Bon-Ton, and jeweler Finlay Enterprises. Circuit City, which sought Chapter 11 protection in November, warned it faces liquidation if it doesn't get a cash infusion. Standard & Poor’s lists nine large retailers and eateries at risk of default compared to six a year ago. "A lot of retailers survived the holiday season because they built up their inventories in the summer before anyone, like their vendors, knew it would be this bad,” says one expert.

Shoppers look at cameras at a Circuit City store on Black Friday, Friday, Nov. 28, 2008, in Baileys Crossroads, Va. The electronics giant declared bankruptcy in November.
Shoppers look at cameras at a Circuit City store on Black Friday, Friday, Nov. 28, 2008, in Baileys Crossroads, Va. The electronics giant declared bankruptcy in November.   (AP Photo/Gerald Herbert)
Passers-by and shoppers walk past the entrance to a Circuit City electronics store, in Boston, Thursday, Dec. 18, 2008. The electronics giant declared bankruptcy in November.
Passers-by and shoppers walk past the entrance to a Circuit City electronics store, in Boston, Thursday, Dec. 18, 2008. The electronics giant declared bankruptcy in November.   (AP Photo/Steven Senne)
In this Nov. 11, 2008 file photo, a worker holds an sign promoting the store-closing sale at the Circuit City store in Mayfield Heights, Ohio. The electronics giant declared bankruptcy in November.
In this Nov. 11, 2008 file photo, a worker holds an sign promoting the store-closing sale at the Circuit City store in Mayfield Heights, Ohio. The electronics giant declared bankruptcy in November.   (AP Photo/Amy Sancetta, file)
Shoppers sit in front of flat screen televisions on display at a Circuit City electronics store in North Bergen, NJ, Friday, Nov. 28, 2008. The electronics giant declared bankruptcy in November.
Shoppers sit in front of flat screen televisions on display at a Circuit City electronics store in North Bergen, NJ, Friday, Nov. 28, 2008. The electronics giant declared bankruptcy in November.   (AP Photo/Mike Derer)
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