Linens 'n Things to close 4 area stores
NEW YORK -- A Chapter 11 bankruptcy filing by Linens 'n Things is the latest sign that the retail sector is becoming leaner and meaner amid a difficult consumer environment.
On Friday, the bedding- and home-furnishing retailer filed a petition in bankruptcy court in Delaware and said it would close 120 underperforming stores, almost a quarter of them in California.
In the Chicago area, stores will be closing in Chicago, Palatine, Schaumburg and Skokie.
Ken Perkins, president of research company RetailMetrics LLC, said the bankruptcy stems from a combination of operating issues and the lagging economy.
"There's clearly a shakeout going on in the retail industry which will continue through the rest of the year," he said. "I think the weaker players are going to be in difficult shape here."
The Clifton, N.J.-based company said economic factors such as the decline in the housing market, tightening credit markets and a downturn in consumer discretionary spending, particularly in the housewares and home furnishings sector, led to a "precipitous decline" in profitability and liquidity.
The factors worsened in the first quarter of 2008, the company said.
Linens 'n Things named Michael Gries of the restructuring firm Conway Del Genio Gries & Co. as chief restructuring officer and interim chief executive. Current CEO Robert DiNicola will become executive chairman. The company's Canadian stores -- which Linens 'n Things said are among the best performing stores -- are not included in the filing.
The filing is expected to be a boon to rival home-furnishings retailer Bed, Bath & Beyond Inc.
"The number of stores Linens 'n Things is closing is equivalent to almost 15 percent of Bed Bath & Beyond's core store base, so there is significant opportunity to gain market share," said William Blair & Co. analyst John C. Murphy.
In a note to investors on Friday, Deutsche Bank analyst Mike Baker said 50 percent of Bed, Bath & Beyond stores overlap with a Linens 'n Things store within three miles. He estimated the bankruptcy could conceivably add as much as 18 cents per share to Bed, Bath's annual earnings.