The business of going out of business
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TEXT OF INTERVIEW
STEVE CHIOTAKIS: Maybe you thought you’d heard the last of Circuit City. The bankrupt electronics chain went under earlier this year, closing all of its stores. But today starts the process of auctioning off the Circuit City brand.
And while the name may live on as some sort of Web site selling audio and video stuff, all those empty stores represent something
much bigger in the retail world.
Fortune magazine’s Allan Sloan joins us now to talk a little about the business of going out of business. And all those stores that are leaving some big shopping voids. Allan — apparently you’ve been keeping up.
ALLAN SLOAN: Over the past few months I’ve been running across any number of bankrupt retailers that turned out to be owned by leveraged buyout houses, which is not the case with Circuit City. Circuit City was run out of business by its competitors. But I’ve got a list of nine other chains, all of which were owned by leveraged buyout houses, all of which were filed for bankruptcy and some of which are going to close some or all of their stores. It’s really an ugly scene. Would you like some of the names just to look around and see what might be missing in your neighborhood soon.
CHIOTAKIS: And some of the names are?
SLOAN: Linens ‘n Things, Mervyns, Sportsman’s Warehouse, a very large chain in my part of the world — in New Jersey — called Drug Fair, Filene’s, Fortunoff’s, Bruno’s Supermarkets, National Wholesale Liquidators, and Whitehall Jewelers. And I’m sure there are more that I’ve missed, but that seems like a good batch to start with.
CHIOTAKIS: Is this a cycle or is it a shift?
SLOAN: Well, I think that it may be both. You have the down part of the cycle, not two and three years ago the chains I was talking about, most of them got bought by leveraged buyout houses then, and that was with the cycle going up because, gee, it’s a stable business, a lot of cash flow. It’s got these real estate assets, it’s got the stores, it’s got these leases. And there was all of this optimism until, really, the middle of 2007 there was no people talking about the worldwide boom. And suddenly the worldwide boom went bust. And now it’s heading down.
You might have with some of these chains a permanent shift in the sense that people are going more and more to the Internet. Some of these chains are clearly not going to make it because the Internet is taking over. So there may be — I hate to use this term — a paradigm shift. I don’t know, but I know this is not the time I would want to be putting my 401k into shopping center securities.
CHIOTAKIS: Fortune magazine’s Allan Sloan joining us. Allan, thank you.
SLOAN: My pleasure, Steve.
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