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More Retailers May Close After Dismal Holiday

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By HEATHER BURKE

Bloomberg News

Published: December 30, 2008

U.S. retailers face a wave of store closings, bankruptcies and takeovers starting next month as holiday sales are shaping up to be the worst in 40 years.

Retailers may close 73,000 stores in the first half of 2009, according to the International Council of Shopping Centers. Talbots and Sears are among chains shuttering underperforming locations.

More than a dozen retailers, including Circuit City, Linens 'n Things and Sharper Image, have sought bankruptcy protection this year as the credit squeeze and recession drained sales. Investors will start seeing a wide variety of chains seeking bankruptcy protection in February when they file financial reports, Burt Flickinger said.

"You'll see department stores, specialty stores, discount stores, grocery stores, drugstores, major chains, either multi-regionally or nationally, go out," Flickinger, managing director of Strategic Resource Group, a retail-industry consulting firm in New York, said Monday in a Bloomberg Radio interview.

Sales at stores open at least a year probably dropped as much as 2 percent in November and December, the shopping center council said last week, more than the previously projected 1 percent decline. That would be the largest drop since at least 1969, when the New York-based trade group started tracking data. Gap and Macys are among retailers that will report December results on Jan. 8.

Consumers spent at least 20 percent less on women's clothing, electronics and jewelry during November and December, according to data from SpendingPulse.

Retail Metrics' December comparable-store sales index will drop an estimated 1.2 percent, or 5 percent excluding Wal-Mart Stores. Retailers' fourth-quarter earnings may fall 19 percent on average, the seventh consecutive quarterly decline, according to Ken Perkins, president of Retail Metrics, a Swampscott, Mass.-based consulting firm.

Probably 50,000 stores could close without any effect on consumer choice, Gregory Segall, a managing partner at buyout firm Versa Capital Management, said this month during a panel discussion held at Bloomberg's New York offices. Only retailers with healthy balance sheets will survive the recession, said Matthew Katz, a managing director at consulting firm AlixPartners.

The shopping council predicts, using U.S. Bureau of Labor Statistics data, that 148,000 stores will shut down in 2008. That would be the largest number since 151,000 closings in 2001, during the last recession, according to the council's Chief Economist Michael Niemira. The total number of retail establishments will decline by about 3 percent this year, also taking into account locations that were opened, he said. The United States had 1.11 million retail locations in 2002.

Another 73,000 locations may shut their doors in the first part of 2009, Niemira said.

The U.S. economy shrank in the third quarter at a 0.5 percent annual pace, the worst since 2001, according to the Commerce Department. Economists surveyed by Bloomberg in the first week of December forecast the world's largest economy will contract through the first half of 2009.

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