One feature that defines a deflationary downturn is the expanding array of sellers. You don't just have the usual crowd who are looking to make a profit or to get rid of something they already own so they can buy something else. You also see more and more individuals and firms who have to sell because they don't have enough cash on hand to meet their needs; lenders who end up with something they don't want because borrowers have defaulted on their obligations; people who are worried about their job prospects or other concerns who want to be more liquid; and others who simply get caught up in the spirit of the times. In "Rising Retailer Threat: Liquidations," the Wall Street Journal shines the light on one group whose ranks are destined to swell dramatically in the months and years ahead.
When Competitors Close, Their Fire Sales Lure Away Customers; KB Toys Latest to Shut Doors, Slash Prices
Retailers grappling with the grimmest holiday shopping season in decades face another threat: a boom in liquidation sales by competitors.
The sour retail market is leading to a flood of store closings, followed by the inevitable going-out-of-business sales. In a vicious cycle, the "everything must go" banners and ads are siphoning off shoppers from already-struggling retailers, further weakening their results, analysts say.
In the last few weeks, retailers ranging from Signet Jewelers Ltd. to Bed Beth & Beyond Inc. blamed competitors' liquidations, in part, for sharply reduced revenue and profit in the fiscal third quarter.
On Thursday, KB Toys Inc. said it has returned to Chapter 11 bankruptcy and will liquidate all of its more than 400 mall-based and outlet stores. The company said it plans to quickly start going-out-of business sales "to take advantage of the last two weeks of the holiday selling season."
Wednesday, Office Depot Inc. announced it plans to shutter 126 stores through next year.
The moves are just the latest in a rash of store closings. Through the third quarter, 15 major chains filed for bankruptcy, including Circuit City Stores Inc., Linens 'n Things Inc., Mervyn's LLC and Whitehall Jewelers Holdings Inc.
Through the third quarter, large U.S. retailers announced 4,632 store closings, according to the International Council of Shopping Centers.
In all, the trade group projects 148,000 storefronts will be shuttered this year by retailers of all types, including mom-and-pop stores, based on data collected by the Bureau of Labor Statistics. That would be the largest since 2001, when 151,000 locations closed.
