Some folks are still growing

Not every retailer is closing stores, filing Chapter 11, or liquidating. Anna's Linens is still opening stores:

Anna's Linens last month opened a second Santa Ana store that sits less than 3 miles away from its other location in the same city.

The Costa Mesa-based discount home furnishings chain signed the lease for the new 9,200-square-foot store in August.

"It was not on our original 2008 new-store plan," said Scott Gladstone, chief operating officer. "However, we are always looking for opportunistic real estate to add to our portfolio of stores."

This makes 263 stores for this chain, which I guess makes them #2 in their category, now that Linens 'n Things is gone.

Target opened 45 stores last Friday, and Kohl's is opening 47 stores in the last quarter of the year, bringing them up to 1000 stores total.

The news is never all bad or all good.

About bankruptcy

The recent bankruptcies of (among others) Steve & Barry's, Mervyn's, and Boscovs has brought to light something of which I was unaware (or at least had given little thought to). The changes in bankruptcy law a few years ago, which at the time were discussed mostly in terms of their effect on consumers, are having an impact on the way retail and other commercial bankruptcies play out. This article in BusinessWeek explains some of the ways in which the law has changed, and how it impacts retailers.

File for bankruptcy, and the pressure now intensifies enormously. Prior to 2005, debtors had 60 days from filing for Chapter 11 to assume or reject a lease. Most of the time, bankruptcy courts would grant repeated extensions that lasted two years or more. Bankruptcy experts argue that gift of time was crucial: They say it takes a minimum of two Christmas cycles before a retailer is ready to put its finances in order and see if its reorganization plan is working.

But mall owners don't like to house bankrupt retailers. An extended, court-run reorganization can hurt the landlord's chance of securing positive financing terms. The real estate industry lobbied successfully for the 210-day cap on how long companies have to assume or reject leases. "Macy's got at least two Christmas seasons, but today if a company files in January, they don't even have until Christmas to decide what they will do," says lawyer Gottlieb.

Other changes require cash deposits to utilities, give priority status to claims from vendors who shipped within twenty days of the filing, and put a limit of 18 months on filing a restructuring plan. These terms will make it more difficult for some of the bankrupt retailers to restructure.

"Stores immediately lose working capital," says Harvey Miller, a partner and bankruptcy specialist at New York law firm Weil Gotschal. He worked with Macy's in the past and has recently worked with several retailers including Goody's Family Clothing, a 355-store chain that operates in 20 states and filed for bankruptcy on June 9. Miller says Macy's reorganization, which took four years, wouldn't have been possible under the new setup.

Retail expansion slows, except for Steve & Barry's

Not surprisingly, given the slow economy, retailers are reacting by cutting back expansion plans or, in the cases where they have gone overboard with expansion in recent years, closing stores.

This article details some of the cutbacks:

• Home Depot is closing 15 stores and reducing by 50 the number of new stores it will open
• Foot Locker 140
• Ann Taylor 117
• Zales 100
• Charming Shoppes 150
• Wison's 158

Pacific Sunwear is shutting down an entire 153-store chain, Demo. In all, the International Council of Shopping Centers expects 5,750 stores to close this year, up 25% over 2007. Penneys, Kohls, and others are still expanding, but at reduced rates.

It isn't all gloom and doom, however. This item tells us that Steve & Barry's keeps expanding at a tremendous rate.

In a year when many specialty retailers are cutting back on openings and shuttering underperforming stores, cheap, fashionable Steve & Barry's is on an expansion roll.

The chain will open 70 stores this year, adding to its current 264 locations.

What's S&B's secret? Not a secret, really -- it's in the headline of the story: Cheap and chic fuels Steve & Barry.

It's no surprise that Foot Locker is closing 140 stores when Steve & Barry's is selling a decent pair of sneakers that appeals to the same demographic for ... get ready for this ... $8.98.

Ahold: Ready to grow again?

After more than two years of licking wounds and selling off divisions to pay the debts, Ahold feels that they are ready to "consign a 2003 accounting scandal to history," according to this article.

Apparently they are looking to buy:

"We have around 3,000 stores now. This year will involve buying separate, smaller chains, building new stores, moving stores and investing in current stores in Holland, east and central Europe and in the USA," Moberg said.

Moberg said the group could grow in the United States to the south, west and north and did not exclude Canada as long as the company could become the number one or two in the market within a reasonable amount of time.

Good luck to them -- they've suffered enough.

Home Depot to slow new store openings

As noted last week (see "Home Depot going pro" below) HD is emphasizing professional business as a hedge against the challenge in the consumer segment from Lowes. This was confirmed when HD announced their plans to analysts.

Though Home Depot said it would slow new-store growth to 400 to 500 through 2010, roughly half the number opened in the previous five years, its plan to derive more sales from professional contractors was seen favorably by analysts....

Although sales to contractors is only 4% of HD's business today, it is projected to reach 18% in 2010. They are also pushing for growth in services/installation, and international expansion.

Lowes, by contrast, will be opening 150-160 stores per year on 2006-07. If that keeps up (a big "if"), Lowes will be closing in on HD in store count by 2010.

More store closures: Mervyns

Joining in the parade of retailers announcing store closures (see Office Max and Toys R Us below), Mervyns has announced that they will be closing twenty stores in Washington, Oregon and Utah.

This is in addition to the 62 closures they announced in September.

Sam Goody goes Chapter 11

Musicland, Inc., the parent of Sam Goody stores, declared bankruptcy yesterday, according to the St. Paul Pioneer-Press.

Just last month, Musicland said it would close its 61-store Media Play chain; this month it is shuttering 59 Sam Goody and Suncoast stores, leaving it with about 750 locations. Another recent sign of difficulty was CEO Jack Chadsey's departure in December after just two months on the job.

Yes, I think it's safe to say that when a CEO quits after two months, it's a bad sign.

A fixture supplier filed suit yesterday: "Excel Fixtures alleged the company misrepresented its financial condition when Excel took on a large job with Musicland, and said it has not been paid for nearly $800,000 worth of work."

More downsizing: Office Max

In line with the Toys R Us post below, Office Max has also announced that they are slimming down. The #3 office supply chain will close 110 of its 950 locations.

Being #3 is a bad position to be in these days.

Thursday Update: Yesterday's link included a sentence saying, "Its largest shareholder, K Capital Partners LLC, demanded in November that the board of directors take immediate steps to improve its "dismal" financial and operating performance."

Now, K Capital has asked in a filing with the SEC that the company be sold:

"We believe the best path forward for your shareholders is obvious," K Capital said in a letter on Tuesday and included in Wednesday's filing. "Why should a company's shareholders have to run a proxy contest to convince its board to do the right thing?"

Another one bites the dust

Casual Corner announced a couple weeks ago that it was closing all its 525 stores (mostly under the Casual Corner and Petite Sophisticates name). It made such an impact that I never noticed it. (Okay, maybe it was because it was the day before Thanksgiving -- a good day to bury bad news).

Susan Cronan, a spokeswoman for the company, would not say what led to the decision to close the stores or answer questions about the closing.

Presumably it wasn't because business was so good that they didn't know how to handle all the profits.