Troubled Retail Chains Come As No Surprise

Yahoo Finance went through a list of ten retailers that are in jeopardy.  I thought it was an interesting list.  As far as the top five , though, not a single one surprised me:

  • Zale Jewlers – I have long wondered how mall jewelry stores can stay in business.  Locating a store in a mall requires huge overhead, plus all the carrying costs of the expensive jewelry that they carry across their many locations.  Since you can’t go to a mall and not run into a Zale, I would expect their costs are very high.  I’d expect their margin to be pretty small, and the slowdown in the economy and subsequent slowdown of purchases on big-ticket items (like jewelry) probably hit Zale like a ton of bricks.
  • Rite Aid – This one is surprising and not at the same time.  The pharmaceutical industry is bigger than ever, so you figure a company that got to the size that Rite Aid did would have had to do something right along the way, and should be able to take advantage of the growing (legal) drug market.  So, from that perspective, it’s surprising that they’re on this list.  However, I’ve followed Rite Aid for over five years, and they’ve been in rough financial shape for nearly a decade.  They went through a huge acquisition stage in the late 1990’s-early 2000’s which was fueled by too much debt.  They never have seemed to be able to recover from this, and I think it’s allowed their competition to pull away from them over the years.
  • Great Atlantic Pacific & Tea Company – A holding company for many grocery store chains out there.  This one doesn’t surprise me because the last GAP&T chain that was in our area went out of business, mainly because their prices were too high when compared to the Wal-Mart and Meijer chains that are significantly cheaper.  High prices for the same products just aren’t going to cut it.
  • TransWorld Entertainment – Their biggest claims to fame are the f.y.e. and Suncoast Movie chains, both of which rely on CDs and DVDs for sales.  ‘Nuff said!
  • Borders Group – Online book selling has nibbled away at the traditional book seller for years.  Now that both are continuing to grow, there seems to be less and less opportunity for the brick-and-mortar stores to flourish.  A few weaker chains have disappeared over the years, and it looks like, out of those left standing, that Borders is probably the weakest of the bunch.

A lot of these retailers have been mainstays for years, but if there’s one thing I’ve learned, it’s that the retail landscape changes constantly.  Today’s hot store can be tomorrow’s going out of business sale!

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