These are tough times for retail chains.
Sliding consumer spending has forced national retailers to rethink their business operations, and several chains have initiated restructuring plans that include store closings and job cuts.
The Commerce Department recently reported discretionary consumer spending rose 0.3 percent in January. Department store sales fell 1.1 percent in the month, as Macy?s, Target and Limited Brands all reported declines in same-store sales.
There?s “no doubt” consumers are challenged by the current economic environment, putting the pressure on retailers to respond, said Scott Krugman, spokesman for the Washington-based National Retail Federation.
“It?s common in a weak environment for retailers to look at which stores are doing well,” Krugman said. “So, unfortunately, store closings are a part of that.”
Last week, Columbus, Ohio-based VCHI Acquisition Co. announced it would close 37 of 113 Value City Department Stores across the country, including seven of the eight locations in Maryland.
The decision to close the Value City locations reflects the owner?s desire to cut costs more than it does the spending power of Maryland consumers, said Richard Clinch, a University of Baltimore economist.
“It probably has more to do with the local competition that it does the Maryland consumer,” Clinch said. “Maryland?s consumers aren?t going to be affected by a recession as much as people in, say, Ohio, because the local economy is relatively stable.
“Wal-Mart and Target are still building in Maryland, so there?s no shortage of demand for discount stores,” Clinch said.
VCHI purchased the Value City Department Store chain from Retail Ventures in January. The store closings are part of a process to “reposition and reintroduce” the Value City brand, said Robin Hepler, spokeswoman for VCHI.
“The new owners group decided to focus its efforts on a core group of stores to reopen Value City as a value-driven retailer,” Hepler said. “There were a number of variables that went into the decision to close the stores, from competition in the area to the age of the buildings to the consumer demographics.”
Of the eight Maryland locations, only the Annapolis location will remain open. The others are in the liquidation process and will close when everything is sold, which could take six to eight weeks, Hepler said.
Value City Furniture stores areowned by American Signature and will not be affected by the closings.
“It?s an unfortunate sign of the times. We?re in a pretty rough patch right now,” said Tom Saquella, president of the Maryland Retailers Association. “I think you?ll see some more closings [by other chains] in the near future as well.”
Furniture stores feel financial pressures
The Value City Department Store chain isn?t alone in feeling the effects of a weakening economy and cautious consumers.
» Domain Home Furnishings, based in Norwood, Mass., last week began a bankruptcy liquidation sale at its 27 stores in the northeast.
There are three Domain Home Furnishings in Maryland, with locations at The Mall in Columbia and in Bethesda and Chevy Chase.
The value of the inventory to be liquidated is about $20 million, the company said in a statement. Liquidation sales are expected to last seven to eight weeks.
Domain filed for bankruptcy Jan. 18.
» Scan International, with stores in Rockville, Columbia and Lutherville, filed for bankruptcy protection in Baltimore Court at the end of December, citing a significant drop in sales from 2005 to 2007.
The company?s liquidation sales are expected to last until March.
» Nationally, Macy?s last week said it would cut 2,300 jobs to overhaul operations and reduce costs. Same-store sales at Macy?s fell 7.1 percent in January.
Macy?s said the cuts would affect staff at regional offices in Minneapolis, St. Louis and Seattle.
The retailer said it was not planning to close any of its department stores. ? Andrew Cannarsa
