Sharper Image And Lillian Vernon File Bankruptcy; Trend Will Likely Continue
It is a trend that is likely to continue for the next several months: retailers filing for federal bankruptcy protection. Sharper Image and Lillian Vernon are just two of the latest retail companies seeking bankruptcy protection. According to the International Council of Shopping Centers (ICSC) web site, sales growth for chain stores in January 2008, particularly department stores and luxury stores, was the slowest since 1970. Discount stores like Costco and WalMart saw only modest sales growth.
It is apparent that consumers are cutting back on luxury items and discretionary spending. The ICSC reports that retailers did not see consumers using their Christmas gift cards in January like they had in previous years. According to the ICSC, WalMart executives are seeing customers purchase food with their gift cards, rather than traditional gift items. It appears that many people are hanging on to their gift cards for future needs.
In a January press release by Plunkett Research, Ltd., researchers estimate the total 2007 retail sales in the U.S. were up only by about 3.8%. The sales increases were in large part a result of higher gasoline prices, deep discounting by retailers during Christmas, and by automobile dealers’ discount incentives offered throughout 2007. The higher fuel prices in 2007 also led to consumers having to pay more for home heating costs and electricity bills and less on discretionary spending.
It is not likely that the retail industry will get the biggest boost from the recently passed economic stimulus package. The ICSC surveyed 1000 people and asked what they intended to do with their $600 or $1200 tax rebates. The ICSC survey results found that 46% said they would use the money to pay off debts; 28% of the people surveyed said they would put it into savings; only 26% of people surveyed said they would spend it.
Sharper Image and Lillian Vernon are not the only retailers to recently seek bankruptcy protection. Other recent retailer bankruptcies include Wickes Furniture, Fortunoff (jewelry, fine silver, home furnishings), Levitz Furniture, Bombay Co., Scan International, Inc. (furniture), Tweeter Home Entertainment Group, Harvey Electronics, Friedman’s Jewelers, Crescent Jewelers, and Movie Gallery.
The largest bankruptcies filed by retailers since 1980 include: K-Mart (2002), Federated Department Stores (1990), Montgomery Wards (1997), Macy & Co. (1992), Allied Stores (1990), Southland Corporation 7-Eleven (1990), Ames Department Stores (1990), Circle K (1990), Carter Hawley Hale Store (1991), Ames Department Stores – again (2001), Revco (1998).
Sources:
http://www.plunkettresearch.com/AboutUs/News/tabid/376/Default.aspx
http://www.thedeal.com/dealscape/2008/02/sharper_image_lillian_vernon_t.php
http://www.bankruptcyaction.com/USbankstats.htm
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Filed under Declare Business Bankruptcy by on Jan 23rd, 2012. 