This year has been an extremely bad one for retailers but 2009 could be even worse because of already slumping sales, the continued credit freeze and what is expected to be an extremely slow holiday season.
Last month sales at stores open at least one year rose at 0.8 percent, much less than the expected 1.5 percent. A healthy consumer market is thought to be an increase in sales by at least three percent. Already this year over 24 stores have either filed for Chapter 11 bankruptcy or closed down.
Those dismal numbers are expected to worsen as the credit freeze deepens. Without easy access to credit retailers may have trouble restocking inventory, paying vendors, making payroll or adjusting long-term business plans.
"Every retailer who goes to renew their credit agreement will face tougher [terms] that will make it extremely expensive to borrow," said Marti Kopacz, managing principal with corporate advisory and restructuring firm Grant Thornton.
The holiday season could also put a strain on retailers. Typically, the months of November and December fuel business, sometimes accounting for as much as 50 percent of annual sales. This year holiday spending is expected to be down as people cut back because of worries about their economic futures.
Some analysts expect as many as 10 to 15 percent of all retailers to close by the end of 2009 due to plummeting sales. The hardest hit industries are expected to be in clothing, jewelry, household appliances and restaurants.
"It's going to be very ugly in 2009," said David Solomon, president and CEO of NAI ReStore.
Source CNNMoney.com:
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The credit market freeze has added to an incredibly tough sales year for U.S. retailers, and analysts warn that these challenges are just the beginning of what could be a brutal 2009 for merchants.
"The worst is yet to come," said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a retail consulting and investment banking firm. |