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US apparel retailers going bankrupte

Written By Views maker on November 24, 2008 | 11/24/2008

Economical slow down has hit hard for the retailers many retailer keep closing down. The worried are not only retailers but also the exporters who have been exporting to them. It's hard time for the apparel manufactures.The gloom surrounding the retail industry is turning into a boom for the merchants of doom.

While a nearly unprecedented number of stores are closing their doors because of bankruptcies or severe cutbacks,
retail liquidators are busier than ever as the economy catches a cold that is fast turning into pneumonia.


“This fourth quarter has been off the charts,” said Andrew Gumear, chief executive and co-owner of Great American Group, a major retail liquidator located in Woodland Hills, Calif. “We are probably the busiest we have been since 2000, and before that it was 1990 or 1991.”

Great American is working with other companies on liquidating the inventories of a slew of retailers forced into bankruptcy. Those include 149 Mervyns stores, 371 Linens-N-Things stores, 62 Shoe Pavilion stores and 354 Whitehall Jewelers stores, to name a few.

The retail liquidation business is a tight-knit group of privately held companies that keep their revenues under guarded wraps. At one time, there were seven main retail liquidators in the United States. They were known as the “Magnificent Seven.”

Now there are six after Gordon Brothers Group LLC in Boston acquired The Ozer Group, based in Needham, Mass., three years ago. The other five are The Nassi Group in Westlake Village, Calif.; Hilco Trading Co. Inc. in Northbrook, Ill.; the Buxbaum Group in Agoura Hills, Calif.; Schottenstein Bernstein Capital Group in New York; and Great American Group.

Typically, this small band of inventory specialists goes to bankruptcy court, makes a bid for a company’s goods, purchases them and then quickly sells them to recoup their costs. Often, several retail liquidators work together to spread the risk of selling inventory that might not sell quickly. Liquidators also estimate the value of inventory when retailers are trying to restructure or negotiate an asset-based loan. Others have auction houses that buy and sell major assets such as heavy-duty machinery, aircraft parts and oil-drilling rigs.

The last time liquidators were this busy was after the dot-com bust in 2000, followed by the aftermath of the Sept. 11, 2001, terrorist attacks, when the U.S. economy hit a rough patch. But this time, it’s not only the U.S. economy that is suffering but other economies around the world.

Japan is officially in a recession. The European Union is grinding into low gear, and China has had to infuse its economy with nearly $600 billion to keep it chugging.

The U.S. unemployment rate in October was 6.5 percent, the highest in more than 10 years and slightly above the 6 percent unemployment rate in December 2002.

The International Council of Shopping Centers in New York estimates that between January and September this year, some 4,632 stores closed or were scheduled to close. Apparel stores made up 26 percent of the total, followed by jewelry stores with a 16 percent share. For the entire year, ICSC is predicting approximately 6,100 stores will close their doors. The ICSC expects that to exceed 3,100 during the first half of 2009. “This is the highest [number] since 2001, when 7,041 stores closed,” said ICSC Research Analyst John Connolly, who said the ICSC started store-closing tabulations in 2001.

Indeed, things are looking almost as grim as 2001 when every aspect of the U.S. economy—airlines, hotels, restaurants, apparel stores and other retailers—were devastated by the attacks on the Twin Towers at the World Trade Center in New York and the Pentagon, near Washington, D.C. For days, airlines were banned from flying, and many travelers for a while feared taking to the skies again.

According to New Generation Research Inc. in Boston, which gathers bankruptcy statistics and runs BankruptcyData.com, 22 retail companies that are publicly traded or are major private companies have filed for bankruptcy this year, compared with 32 in 2001. But since most of the dire retail activity has been in the fourth quarter of 2008, many predict that 2009 will be worse than 2008 when it comes to store closings.

“The expectation is that once we come out of the holiday season, we are going to see a significant number of store closings,” said Richard Kaye, executive vice president at Hilco. “Our projections are that probably by the end of the second quarter of 2009, we will see about 14,000 stores closed beyond the current level.”

Hilco expects that next year there will be as much as 75 million square feet of vacant space at shopping malls as a result of so many stores closing.

Different times

The fear of flying seen in 2001 has turned into the fear of losing your job, your house or both. Credit has evaporated, causing turmoil in the retail world and a roadblock to consumer spending. Consumers looking at their investments are feeling poor even if they still have a job and a house. There may be just as many shoppers in the store, but they are spending less. In October, several retail concerns saw their same-store sales slide into uncharted territory. Neiman Marcus’ October sales plummeted nearly 13 percent. Nordstrom saw its same-store sales slip nearly 9 percent. Macy’s was down 6.3 percent.

“I would venture that there are going to be a lot more bankruptcies after the first of the year,” said Stevan Buxbaum, executive vice president of the Buxbaum Group.

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