A ‘wave of retailer bankruptcies’

A ‘WAVE OF RETAILER BANKRUPTCIES’…. We talked the other day about the striking drop in consumer spending over the holidays, with revenue that was “much worse than the already-dire picture painted by industry forecasts.” The Wall Street Journal reported this weekend that the commercial landscape is likely to deteriorate further in the new year, with a “wave of retailer bankruptcies.”

“We will have a lot fewer stores by the middle of 2009,” says Nancy Koehn, professor of business administration at Harvard Business School. “It’s happening very, very quickly because of the financial crisis and the recession.” […]

Corporate-turnaround experts and bankruptcy lawyers are predicting a wave of retailer bankruptcies early next year, after being contacted by big and small retailers either preparing to file for Chapter 11 bankruptcy protection or scrambling to avoid that fate.

Analysts estimate that from about 10% to 26% of all retailers are in financial distress and in danger of filing for Chapter 11. AlixPartners LLP, a Michigan-based turnaround consulting firm, estimates that 25.8% of 182 large retailers it tracks are at significant risk of filing for bankruptcy or facing financial distress in 2009 or 2010. In the previous two years, the firm had estimated 4% to 7% of retailers then tracked were at a high risk for filing.

One-fourth of all retailers is a lot of stores. Think about your local mall, and then think about a quarter of the stores disappearing, as compared to a year prior.

The ripple effect will be fairly broad, affecting suppliers and manufacturers, and limiting retail selections for those shoppers who have disposable income, but won’t find as much of what they’re looking for on store shelves.

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Steve Benen

Steve Benen is a producer at MSNBC's The Rachel Maddow Show. He was the principal contributor to the Washington Monthly's Political Animal blog from August 2008 until January 2012.