Retail Chains Going Bankrupt

Posted by Connie Yee

The current economic crisis is slowly reshaping America’s malls and shopping districts. Consumers are spending more on basic necessities (gas, food and rent) and purchasing less of other goods (furniture, clothing and electronics).

Since the end of 2007, many retail chains such as Levitz and Sharper Image have filed for bankruptcy protections. These major chains are unable to produce a profit as their debt continued to increase and sales decrease. Other retailers have tried to avoid filing for bankruptcy by closing stores or delaying expansion to preserve their cash flow. Over the next year, retailers such as Foot Lockers would close up to 140 stores around the country. The International Council of Shopping Centers estimated that there were 5,770 store closings in 2008, and this number is expected to increase in 2009.

The downturn in the economy is not only affecting retailers but also shopping centers. With less retailers willing to expand, the construction of new malls around the country is put on a halt. The bankruptcy of existing retail chains means more vacant restate on the market, and the need for new mall is on a decline. “In this environment, most retailers are wary of signing new leases—particularly for anything for 2010.”

References:
Retailing Chains Caught in a Wave of Bankruptcies
Few new shopping centers while economy's dropping
Retail Chain Said to Face Bankruptcy