Bankruptcies at Bradlees, Ward Resonate in Retail
A dismal holiday season for U.S. retail, perhaps the worst in more than a decade, ended with Chicago-based Montgomery Ward Inc. and Braintree, Mass.-based Bradlees Inc., two retail chains that together operate approximately 356 stores, ringing out the old year in bankruptcy courts.
One result of the two retailers’ separate Chapter 11 filings, which both occurred days after the Christmas holiday, will be that approximately 28,000 Ward employees and 10,000 Bradlees employees are expected to lose their jobs in coming months.
Another result is expected to be a flood of new retail real estate coming on the market as Ward sells 100 stores it owns outright. Ward rents its remaining 152 stores’ spaces and Bradlees rents all of its 105 stores; most likely, the two chains will terminate the leases for those 257 stores, bringing still more open retail space into the marketplace.
Yet another result of the two bankruptcies will be a deluge of discounted merchandise, further depressing overall retail prices, as both chains liquidate their inventories.
The two bankruptcies may trigger a second wave of “consolidation” in the retail industry, according to various analysts, particularly if the U.S. economy continues to slow and other weakened chains succumb to the predicted tougher times ahead.
The end result may be a generally stronger industry following the possible shakeout, according to analysts, in which the stronger and better-positioned retail chains operate in an environment with fewer competitors.
Roger V. Goddu, Ward’s chairman and chief executive officer, called the end of his storied company’s 128-year history “unavoidable,” and cited weak holiday sales and a “very difficult” retail environment as the cause.
Over the next several months, Ward will shutter its stores in 30 states and its 10 distribution centers, according to a Ward statement. The company already has moved to suspend unpaid vendor deliveries and eliminate approximately 450 national office jobs, according to the statement.
Ward was founded in 1872 as a general merchandise mail-order-catalog business and is currently owned by GE Capital, General Electric Co.’s financial-services division.
Many of today’s standard retail sales practices, including the mail-order catalog itself and the promise of “satisfaction guaranteed or your money back,” were pioneered by Ward, which was founded 14 years before Sears, Roebuck & Co., its traditional main competitor.
Ward, which did approximately $2 billion in business in 2000, expects to post a $227 million net loss for the year.
Bradlees, the regional discount retailer with approximately 105 stores in the Northeast, has been in business for more than 40 years. Its product lines are focused on just a few target areas, including moderately priced basic and casual apparel and basic and fashion items for the home.
Bradlees announced that it will close its doors within the next two months, putting more than 4,500 employees out of work in the New York, New Jersey and Connecticut stores alone, and will sell its inventory to a group headed by Boston-based Gordon Brothers Retail Partners LLC.
The company cited the consumer-spending slowdown, higher gas and oil prices and competition from other discounters as reasons for its shutdown.
The Bradlees five-story flagship store is located at Union Square in New York City, and several retailers are expected to bid for that prime location.
Courts have yet to approve the two chains’ bankruptcy plans.
