It seems so astonishing that it can't be true, but there are experts who believe that 25% of American retailers could fail over the course of the next year or two. According to The Wall Street Journal (subscription required), "AlixPartners LLP, a Michigan-based turnaround consulting firm, estimates that 25.8% of 182 large retailers it tracks are at significant risk of filing for bankruptcy or facing financial distress in 2009 or 2010."
If an extremely large number of retailers do close, the job loss could be incredible. Troubled retailer Pier 1 (NYSE: PIR), which trades at $0.33, has more than 6,100 employees. Rite Aid (NYSE: RAD), which also trades at $0.33, has over 60,000. If several medium-sized to large store chains move into bankruptcy, hundreds of thousands of jobs will be at stake. This does not include more modest-sized operators.
The retail industry is critical to the American economy. If it falls apart rapidly, it helps put the recession into a deeper downward spiral. Retail employees lose jobs and then are no longer consumers. With fewer consumers, more retailers and other business fail. Tax income for municipal, state, and the federal governments is also undermined, putting pressure on government employment.
The jobless rate my be close to 7% now. The retail part of the economy could move that number up quite a bit all by itself.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
12-28-2008 @ 8:44AM
JOHN said...
With all this bad news everywhere. What needs to be done. I do not have the answer and looking for someone to give it to us. I love this country and feel sorry for all of us. People who stayed out of debt I say good job, but people who got in debt. Its not entriely your fault. The banks and credit card people should of said no you cannot get that card or loan. How can someone making 50,000 get over 75000 in open credit and buy a 350000 house. GOD BLESS....
12-28-2008 @ 10:30AM
TX CHL Instructor said...
You statistical base is ambiguous. Over 90% of all new businesses fail within two years, and that's the way it's always been.
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www.chl-tx.com -- due to fear of Obama's proposed "changes", my business is doing better than ever.
12-28-2008 @ 11:59AM
moonie said...
Here is a wakeup call America could fall in the next year or year and a half!! duh you say. Ok get this in 1929 when the stocks bottomed the un-employment rate fell to 25% ok its simple buy American products to save America !! DUD you say another soothsayer. well i have been in business my entire life i've had business fail but mostly they succeeded. Problem here is that if 25% of American retailers fail then we could easily fall beyond 25% un-employment and this could very easily happen it is SCARY FOLKS!!BUY AMERICAN AND BUY AMERICAN ONLY now BEFORE IT'S TOO LATE !!!iF AMERICA GETS DOWN TO 25% LOSS OF AMERICAN RETAILERS THEN BETTER GET YOU SEVERAL GUNS BECAUSE YOUR HOME WILL GET INVADED IN THE DAYTIME IT WILL BE SO BAD. YOU WONT BE ABLE TO GET ANY FOOD BECAUSE THE STORES WILL BE RAIDED AND CLEANED OUT NOW SAY duh!!!
12-28-2008 @ 12:55PM
Steve said...
Anyone who thinks we'll be coming out of this economic catastrophe in six months or a year must be living on another planet.Fasten your seatbelts. '09 is going to be a rough ride.......
12-28-2008 @ 4:10PM
Ken said...
The market will never recover and sadly will continue to fall apart. Putting an end of Unions was the biggest mistake ignorant people made. Less pay and more work and having to pay for your own medical insurance was a result of that stupid decision....
The government is clearly at fault for giving big corporations and manufacturers incentives to leave America and do business elsewhere. Big business is at fault for moving to foreign countries to cut costs and pay people substandard pay in a country that is not their own.
America will never recover from this meltdown until the Big businesses come home and the Unions are restored. You can of course work for Wal-Mart and still be on Welfare if you rather.