Tuesday, October 21, 2008

Going Down Down Down...

The trickle is already starting, a touch earlier than expected.

Linens 'N Things is seeking to liquidate here in Canada after getting permission in the States. The Canadian operations are actually profitable, but with the parent company shutting down in the US and credit hard to come by for the competition to buy them up, this could be their only route. There was talk of HBC or Bed Bath and Beyond buying the Canadian stores, but that seems to have fallen through. I wouldn't be surprised if BBB swept in and picked up the store leases though.

And now word comes that Circuit City is looking to close stores and layoff employees to stave off bankruptcy before the holiday season. Why? Because they're afraid that if they declared before then, nobody would shop at their stores for Christmas out of fear that extended warranties and gift cards wouldn't be honoured. They're right. Personally, IF we had Circuit City in Canada (we have "The Source by Circuit City", which is just Radio Shack, and generally useless), I wouldn't shop there unless they had a hell of a deal on. This has been one of the most horrendously managed tech stores I've ever seen. Stock's trading around $0.35 anyway, and every time I see them in the news, I'm shocked they still exist.

Now, LnT filed for Chapter 11 a while ago, and CC has been in trouble for a long time, but with accesible credit drying up, they're the first of what will be many casualities in the retail sphere. Most of that damage will come post-holidays though, as consumer confidence is at record lows. This will have the "trickle-down" effect of seriously hurting commercial real estate like those giant big-box plazas that pop up overnight. Any potential buy-outs will come at the tail-end of desperation, when the purchase price of the company will be at rock-bottom, and something makes the purchase worthwhile (prime real estate, brand-affiliations, etc..)

What does this mean? In broad economic terms, it's not good in the short-term. For the consumer, it means waves of sales as companies either try to stay afloat or liquidate as they go down.

1 comment:

Alan aka RecessRampage said...

CC going down is gonna really hurt the local economy here in Richmond, VA. But rumors are that they don't even have enough cash flow to move inventory...