After Holidays, Retailers Face Nightmare

Spate Of Store Closures Expected As Fallout From Poor Shopping Season Takes Hold

(CBS/AP)  The holiday season has turned quickly from a shopper's paradise to an end-of-the-year nightmare for many retailers across the country.

Stores desperate for cash tried enticing consumers with sales. But signs point to a horrific holiday season for retailers, with the operator of an online toy seller filing for bankruptcy protection and more stores expected to do the same - meaning more empty storefronts and fewer brands on store shelves.

"People were being very picky. They were choosing to leave stores empty handed rather than go out with what they perceived as an OK deal," Kelli Grant, senior consumer reporter at SmartMoney.com, told CBS News. "They were really waiting for the prices to get better and better and better."

A rash of store closings, which some experts predict will be the most in 35 years, is likely to cut across areas from electronics to apparel, shrinking the industry and leading to fewer niche players and suppliers.

"No store is safe here. I've heard analysts talking about grocery stores, drug stores, discount stores," Grant told CBS News.

The most dramatic pullback in consumer spending in decades could transform the retail landscape, as thousands of stores and whole malls close down. And analysts expect prolonged woes in the industry as the dramatic changes in shopping behavior could linger for another two or three years amid worries about the deteriorating economy and rising layoffs.

"You are going to see a substantial retrenchment in the retail industry," said Rick Chesley, partner in the global bankruptcy and restructuring group at international law firm Paul Hastings. "The downturn has been catastrophic."

A number of stores couldn't even make it to Christmas. Circuit City Stores Inc. filed for bankruptcy protection last month. It plans to keep operating, but toy seller KB Toys, which filed for bankruptcy earlier this month, is liquidating its stores and will shut down.

The survival prospects for many more stores are dimming as more sales data comes in about the crucial holiday shopping season, which can account for up to 40 percent of a retailer's annual profit.

Holiday sales fell from 2 percent to 4 percent compared to a year ago, according to SpendingPulse, a division of MasterCard Advisors. Excluding gas and car sales, they dropped between 5.5 percent and 8 percent from Nov. 1 through Dec. 24, as key categories from luxury to electronics posted double-digit sales declines. Sales of electronics and appliances fell almost 27 percent, for example.

ShopperTrak RCT Corp. which tracks retail sales and customer traffic at more than 50,000 outlets, said Monday that it now expects foot traffic to be down 16 percent and sales to decline 2.3 percent for the November and December period.

The retail casualties, which were first among home furnishing stores and then many apparel stores over the past year or so, are expected to cut across all sectors as shoppers have slashed their spending on nonessentials, from TVs to jewelry.

About 160,000 stores will have closed this year and 200,000 more could shutter next year, said Burt P. Flickinger III, managing director of consulting firm Strategic Resource Group. That would be the industry's biggest contraction in 35 years. In March and April of next year, Flickinger expects 2,000 to 3,000 malls to shutter.

AlixPartners LLP, a turnaround consulting firm, predicts that 25.8 percent of 182 major retailers it tracks are either facing major financial distress or will face a significant risk of filing for bankruptcy in either next year or 2010 - the highest level in the 10 years that the firm has been compiling the figures. That compares with the 4 percent to 7 percent that it predicted would face financial woes in the previous two years.

Among the most vulnerable are retailers that have debt coming due soon and had relied on solid holiday sales to generate cash, said Matthew Katz, managing director in the firm's retail performance improvement practice. But he said he's also watching merchants whose debt is not due until later in 2009 or 2010, but are paying big interest payments as they struggle with high debt loads and shrinking revenues.

Some of the retailers that analysts say they are watching carefully are struggling regional department store Bon-Ton Stores Inc., of York, Pennsylvania, and apparel retailer Goody's Family Clothing Inc., which filed for bankruptcy protection in June but emerged from Chapter 11 in October. Officials from Bon-Ton and Goody's did not immediately return calls seeking comment.

This week Parent Co., the operator of etoys.com, filed for Chapter 11 bankruptcy protection and said it will consider selling some or all of its operations. Chris Byrne, a New York-based toy consultant, said that etoys.com couldn't compete with the aggressive tactics embraced by Toys R Us and Wal-Mart Stores Inc., the nation's top two toy sellers.

[auscross1277]

electing honest regular citizens to elected office,
End the Criminal Corporate owned Political System. Posted by stinginrich at 07:30 PM : Dec 30, 2008
*** I tried electing honest regular citizens.. but Edwards didn''t win the Democratic nomination.. maybe he will try again in 8 years... I hope soo... Edwards 2016!!!

[auscross1277]

It was so funny to see what those stores are doing to trick us. For example, one store was displaying "Grand Liquidation, all must go, 75% off" and then every thing had been originally marked very high and the 75% off seemed like you were paying full price on their clothes. Then to top that, there was a sign outside "Now hiring". Weren''''t they liquidating and everything had to go? Hellooooooooo! Customers are not dumb! Posted by nfclrd at 03:22 PM : Dec 30, 2008*** anyone that voted for amnesty mccain is dumb!

[pepperwood2]

Not so fast! Some groups stand to make out while consumers & retailers find the pickings slim.

Pay Raises for Lawmakers Anger Watchdog Groups
Each lawmaker is due for a $4,700 cost-of-living wage hike starting in January, which will amount to a total cost of $2.5 million for taxpayers

[stinginrich]

Americans have the opportunity to sieze back power from Criminal Corporate and Political interests by refusing to play their game. It''s time to start conserving everything, stop buying anything but basic necessities, grow a garden, and buy food from local family farmers and small businesses. Don''t go to Walmart, don''t joyride through gallons of gasoline, and start electing honest regular citizens to elected office, to finally end the reign of the Ruling Elite.
You don''t need more Bling, new Rims, or the latest Flat Screen and Blue-Ray with Surround Sound.
End the Criminal Corporate owned Political System.

[win4usa]

Maybe people are finally learning the difference between wants and needs. Start saving as you''re going to need it. Depression 2009

[tucson23]

There are no real deals out there. The retailers are still trying to scam the money out of our pockets.
Posted by kevinkkloste

You said it. I looked hard for real bargains in consumer electronics, and all I found was smoke and mirrors. So-called sale prices were actually the same as the manufacturer''s MSRP. One DVD player at Circuit City was $99 ''after $30 savings.'' The MSRP for that player: $99. In televisions, all of last year''s obsolete models were brought down a couple of hundred from prices that were way too high to begin with, and none of this year''s TV''s (with new features like 120hz) were discounted to any great extent. They''re just trying to dump last year''s inventory, and not even doing a good job of that. If they can''t discount and they''re going out of business, oh well. But if they CAN discount and won''t, they deserve what they get. After all, if you can''t sell your house and you won''t lower the price, whose fault is it?

[debinok1]

A few years ago I went back to school to get my Bachelors in Administration, My text book then stated that the economy today is IT and service based. I wondered then, how long that would last. I think it is safe to say that it has reached its end.

[bobnjersey]

[The next big crisis we are facing; the collapsing dollar and the Depression that will follow. ... Are You Ready? ...]
[Posted by Hackerpc at 11:24 AM : Dec 30, 2008]

if this happens between say ... tomorrow ... and 12/31/09 ... then mr. batra has hit it dead on.

i hope it doesn''t ... but his record is good.

http://www.amazon.com/New-Golden-Age-Revolution-Corruption/dp/1403975795/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1230675692&sr=8-1

[kailumego1]

Greedy capitalist merchants, self-aggrandizing corporations, and political puppets, all has drained this economy and sent this country to the tombs.

We''ve allowed big business to have a "free hand" in the market, without, circumspection, and look at where it''s gotten us, a bankrupted country.

70% of the GDP is based on consumer spending, no jobs, no spending, it doesn''t take Rover the dog to figure this one out.

How inept has members of congress, the president, and lobbies have to be, if they didn''t see this one coming, a mile away.

And the "dumb arse" Republicans and Democrats, along with their capitalist cronies, has ran this country into the ground.

[downtowner97]

The one bright spot I see in America right now is JPL. The mars rovers, Spirit and Opportunity, will have lasted 5 years in January. Think about it. These two robots traveled to mars, landed using parachutes and airbags, and have been rolling around on Mars for 5 years. Would you be willing to bet your car would go 5 years here on Earth without a major repair? What if it was one of the first two of its kind your car company made?

We have the ability to invent and build amazing things here in America. We''ve spent a generation delegating innovation and construction of our goods to other countries. We can''t shop ourselves back to prosperity. We need to be innovative again.

[tmittelstaed]

Your seeing the results of a big game of "chicken" this season. The major chains were afraid to go into a price war with each other so they held the line on most things - and the sales they did have were miserly - extremely restricted hours, only a couple days on the weekend, limited items, that sort of thing - with many loss-leaders (like DVDs) of little value and little cost. You will also note the lack of many new toy introductions this season - this allows the retailers to keep the current toys on the shelf that much longer. About the only area with steep markdowns was womens clothing. The retailers all hoped that by not engaging in a price war that the customers would be forced to spend at the last minute. That didn''t happen so it seems that mergers and bankruptcies are going to be the result.

[ocasanas]

It was so funny to see what those stores are doing to trick us. For example, one store was displaying "Grand Liquidation, all must go, 75% off" and then every thing had been originally marked very high and the 75% off seemed like you were paying full price on their clothes. Then to top that, there was a sign outside "Now hiring". Weren''t they liquidating and everything had to go? Hellooooooooo! Customers are not dumb!

[ocasanas]

When stores have what I want, I''ll buy it from them. Meanwhile, they can display all their merchandise, keep the lights on, keep paying rent for their land, and on and on and on, but I won''t buy what they have at the prices they offer because is not what I need to buy. Stores sell you what they want to sell you, and they tell you that they are out of stock on your item, well, I''ll be waiting, and I won''t go bankrupt as they will.

[destardi]

Posted by krazytaz312 at 01:26 PM : Dec 30, 2008
+ report abuse
------------------------------

Yea, all of us who drive to work are responsible for the $4.00 a gallon prices, and huge increases in basic necessities..such as, say, FOOD!

yes there are many Americans living above their means, to maintain image, but to say that the government and its policies (of lack of) haven''t had a negative impact on us, is absolutely STUPID.

Check out bush''s roll back of banking laws.

It''s not the average American causing our banks to freaking fail. Duh.

[perk235]

A country with a gross domestic product that relies primarily on consumers and has outsourced manufacturing is not sustainable.

Tax benefits to companies who outsource manufacturing jobs should be stopped immediately.

[roblin2005]

Trickle down economics?

The system will eat itself, the system will eat itself.

[kittykatty2]

Yeah, the only crapola these retailers are willing to slap a "sale" sign on are the Christmas items. Sorry retailers, we aren''t that stupid.

[krazytaz312]

A society based on materialism and consumption eventually crumbles. Too many stores, too many cheap quality products (regardless of price), too many people living on plastic that created a false life for themselves, too much superficiality and hype. The economic crisis is forcing people to perhaps do what they should have been doing all along and that is to live on less and within their means and to appreciate more those intangibles that truly make life worth living, like family, friends and spirituality.
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Posted by Credibility2 at 01:15 PM : Dec 30, 2008

Hear Hear!! I agree with you wholeheartedly. We, the consumer, created this mess. We were so eager to spend money we didn''t have with little regard to how we were going to pay our bills. I was careful this past holiday season everytime I pulled out my card. Yes I used the card, but I was smart enough to know how much I could pay off at the end of the month. I didn''t spend more than I could afford and still had a very nice Christmas.

I bet the one''s blaming the president and congress for this mess are the same ones that have huge credit card debt and are now feeling the pinch.

[credibility2]

A society based on materialism and consumption eventually crumbles. Too many stores, too many cheap quality products (regardless of price), too many people living on plastic that created a false life for themselves, too much superficiality and hype. The economic crisis is forcing people to perhaps do what they should have been doing all along and that is to live on less and within their means and to appreciate more those intangibles that truly make life worth living, like family, friends and spirituality.

[glenn_lewis]

I HAVE NOTICED NO REAL MARKDOWNS EITHER. MOST RETAIL STORES SEEM TO BE PART OF A SCAM THAT SAYS, "HEE, HEE, WE HAVE GREAT PRICES!" MOST SHOPPERS ARE NOT THAT STUPID!