Savings, Not Debt is Fundamental

This is a partial list, just Orange County, of retailers in trouble. You'll perceive the common thread is they cannot manage the debt they owe. This sisStarbuck's problem as well. AS I mentioned, midrange retail biz are disappearing. In the measure they took their cue from government policy signals and chose to malinvest and overinvest, they are now in trouble. It strikes me that the retailers with the most predatory business plans are suffering first. Rough justice..




I've argued we can love WalMart and Home Depot and the other mass merchandisers for their good work lowering the cost and widening the access to material goods and services. I've also argued they are not for us.

We belong in the specialty range, where high margin competing on design and frequent deals are the norm.

So the high end and mass end are doing fine, which leaves the midrange customers like Macy;s (as opposed to say Neiman Marcus). Macy;'s and GM and others thrived when credit was cheap and the predatory lending practices covered up the overcharging these retailers practiced. Their policies attracted the least prudent customers, and now their businesses are in trouble.

I've seen this problem before... the trick is to check credit and be quick to "fire customers." I explain the credit checking process in the book, and as an overview just learn essentially "can your customers manage the debt they hold?"

Also now opportunities abound... we'll see debt-free new companies emerge who will fill in as these others disappear. WE'll see suppliers eager to accommodate new customers. Real estte will be dirt cheap. WE'll also see great swaths of unemployed, but even if the economy shrinks as bad as the Great Depression, say by 30%... big deal, we'll still be one of the largest economies in the world. There was never any chance we would fully penetrate the US market at the small business level anyway. Even if economy falls 50%, it would still be one of the largest in world... it's all about customers...

In this era trading on frequency more likely... and savings not debt will be how you thrive.

Check out who is in trouble...

Ann Taylor closing 117 stores nationwide.
Eddie Bauer to close more stores after closing 27 stores in the first quarter.
Cache, a women?s retailer is closing 20 to 23 stores this year.
Lane Bryant, Fashion Bug, Catherines closing 150 stores nationwide
Talbots, J. Jill closing stores. Talbots will close all 78 of its kids and men's stores plus another 22 underperforming stores. The 22 stores will be a mix of Talbots women's and J. Jill.
Gap Inc. closing 85 stores
Foot Locker to close 140 stores
Wickes Furniture is going out of business and closing all of its stores. The 37-year-old retailer that targets middle-income customers, filed for bankruptcy protection last month.
Levitz - the furniture retailer, announced it was going out of business and closing all 76 of its stores in December. The retailer dates back to 1910.
Zales, Piercing Pagoda plans to close 82 stores by July 31 followed by closing another 23 underperforming stores.
Disney Store owner has the right to close 98 stores.
Home Depot store closing 15 of them amid a slumping US economy and housing market. The move will affect 1,300 employees. It is the first time the world's largest home improvement store chain has ever closed a flagship store.
CompUSA (CLOSED).
Macy's - 9 stores closed
Movie Gallery ? video rental company plans to close 400 of 3,500 Movie Gallery
and Hollywood Video stores in addition to the 520 locations the video rental
chain closed last fall as part of bankruptcy.
Pacific Sunwear - 153 Demo stores closing
Pep Boys - 33 stores of auto parts supplier closing
Sprint Nextel - 125 retail locations to close with 4,000 employees following 5,000 layoffs last year.
J. C. Penney, Lowe's and Office Depot are all scaling back
Ethan Allen Interiors: plans to close 12 of 300 stores to cut costs.
Wilsons the Leather Experts ? closing 158 stores
Bombay Company: to close all 384 U.S.-based Bombay Company stores.
KB Toys closing 356 stores around the United States as part of its bankruptcy reorganization.
Dillard's Inc. will close another six stores this year.



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