The New York Times reports that Bennigan's -- an "Irish-themed bar and grill" -- closed its 200 U.S. sites, throwing hundreds out of work. When you combine gasoline prices over $4 a gallon, higher food prices, and declining incomes, people change their economic behavior. That is particularly true when people can no longer use the equity in their homes to cover the gap between what they want and what they can afford.
In April, I posted on the recession diet, which is the way that consumers are coping with the squeeze on their budgets. They have staycations, they don't drive to or shop at the mall, they eat at home, and they buy more pasta and consume fewer vegetables and steaks.
It's great news that gasoline prices have come down recently -- in some cases as much as 20 cents a gallon. But it's not clear whether that will be enough. In any case, the Times provides a nice list of those restaurants and retailers that have filed for bankruptcy in the wake of the recession diet:
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Mervyn's, mid-tier department store chain
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Steve & Barry's, a fashion retailer
I think there will be more such bankruptcies and I plan to look at publicly traded companies in these industries to see which are the likeliest candidates. If you have ideas you'd like to analyze, please post your thoughts below.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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Reader Comments (Page 1 of 1)
7-30-2008 @ 12:14PM
william lindblad said...
A.C. Moore, Michael's, Bed,Bath & Beyond, World Market, Sears/KMart & Most of the upscale food & drink chains. I would not be surprised to see some of the hotel chains & resorts make this list. Just about all in the retail & service business has suffered monetary loss this year and winter is coming. The price of fuel has dropped, but the damage that it created is far from working through.
7-30-2008 @ 12:26PM
John Chauvin said...
How about looking at the rental car industry. I just don't see companies like DTG, CAR and HTZ being able to survive in economies such as these.
What do you think?
7-30-2008 @ 12:33PM
jt said...
these were all obvious losers that should have gone out of business a long time ago.
7-30-2008 @ 1:23PM
Mike said...
Steak and Ale and Bennigans have been sick for years. It was just a matter of time. As for the post about the car rental companies, I travel every week and I have never had such a hard time getting cars. The prices are higher than ever. I was in Houston, Chicago, Kansas City and Omaha the last two weeks and I didnt have my choice of car rental companies or hotels. I had to go thru several of each to find cars or hotel rooms available.
7-30-2008 @ 1:42PM
william lindblad said...
I should clarify - remarks regarding the hotel industry are aimed at the resort areas which is a big chunk of the entire business. We should also consider and not forget that the numerous small businesses - from the ones in the shopping centers to those in vacation spots are also taking a beating. These close without much fanfare and all represent a loss of tax revenue to the local government.
Let's consider what the current Newsweek reports - "the default rate on existing condo's in Miami is at 25% and there are 22,000 new units still under constrution." That is a lot of default, both known and expected. It also means that there is at least 60,000 less people around to spend and support the local economy.
At least 60% of our economy is consumer spending based.
7-30-2008 @ 5:21PM
Chris Bailey said...
What I think is incredible is the effect of the gas prices on US consumer habits.
If you look at the UK, our gas prices have long been huge but yet somehow we put up with it! Hence the phrase "rip off Britain".
And at the same time, people are not yet using the car less.
Chris
www.EjaculationSupremacy.com
8-13-2008 @ 8:13PM
Cheyenne said...
Comparing UK gas prices to US gas prices is apples and oranges...."somehow we put up with it" is a ridiculous statement. Do you not realize how LARGE the United States of America is? Just today, for work, I drove 110 miles. All within one state. I've been to Europe. You can't compare gas prices in Europe to ours. That reminds me of an exchange student I roomed with in college. We were in North Carolina and she informed me that she was wanted to drive to California one weekend. Crazy.
8-13-2008 @ 10:47PM
Chuck Rothsterin said...
It is even more to worry about, with the election around the corner and the possibility of the candidate that wants to raise taxes, against drilling,
wants to install national health care for illegal immigrents and has no foreign policy experience
leading in most of the polls......We think we have problems now-----just wait, this might be just the begining....
8-15-2008 @ 10:43PM
Chris said...
Why are we not hearing of the Obama gas tax??? As if gas isn't high enough... people better wake up and do some research on this guys tax proposals. How about Obama taxing capital gains on home sales? Want to see the real estate market flooded with more homes? Wait and see.... how can anybody even suggest that in these tough economic times????