Last year was rough on many businesses. The list of companies that filed for bankruptcy is long and surprising. There was Circuit City, Eddie Bauer and Six Flags, not to mention many of the Detroit car dealers and newspaper companies. Of course, as we’ve written before, some companies do manage to come back to life even after bankruptcy.
We should make clear at the outset that we are not saying these companies will definitely go bankrupt in the next year, only that they are in a weak position heading into 2010.
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It may have the largest department store in the world, but that status is useless if people start shifting away from department stores entirely. For the last few years, shoppers have been relying less on these stores. Macy's (Stock Quote: M) started the year by closing 11 locations, then cutting 7,000 jobs and selling off a warehouse. In general, their stocks have been flimsy all year. According to Stylecaster.com, Macy’s will “have to adjust to lower household incomes and… dips in household spending” if it wants to survive.
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Luxury stores are suffering just as badly if not worse than regular department stores. Barneys has experienced bankruptcy before and emerged from it. But at the end of 2009, it seemed likely they might go bankrupt yet again. Reports surfaced in September that Barneys was struggling with debt and might be on the verge of declaring bankruptcy. For the time being, the fate of Barneys may be determined by whether they can partner with another investor. At the moment, the leading candidate is Holt Renfrew, a Toronto department store. If the deal fails, the chain may go bankrupt soon after.
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Rite Aid’s (Stock Quote: RAD) same-store sales declined heavily and their stocks were in the gutter for much of 2009, struggling to rise above the $1 mark. And according to a bankruptcy report from Audit Integrity, a financial research and risk modeling firm, Rite Aid is one of the companies most likely to declare bankruptcy in the next year due primarily to “heavy debt loads.”
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It’s not just stores that are in danger of bankruptcy these days. News organizations have suffered many setbacks during the recession, as many publications have folded and more than 15,000 newspaper jobs were lost in 2009. According to Business Insider, CBS (Stock Quote: CBS) saw its profits decline in 2009 due to “weak advertising and falling license fees.” The company also has more than $3 billion worth of debt. Perhaps CBS should consider switching to a more conservative news bent. It seems to be working well for Fox News.
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Blockbuster (Stock Quote: BBI) won’t go out easy, but it may go soon nonetheless. SmarterSpend.com declared this to be one of the ten most likely companies to go bankrupt in the next year and we have to agree. There were plenty of rumors that the company would go bankrupt earlier in the year, when their stocks were in the gutter and profits for Netflix, an online movie rental service, continued to skyrocket. And the situation hasn’t really improved very much. Already, there are plans for the company to close nearly 1,000 stores this year nationwide. In an attempt at innovation, the chain is now introducing movie kiosks into outside stores like Duane Reade. But it is likely too little, too late. For a great analysis of Blockbuster’s decline, check out this piece in Salon.
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Hertz and Goodyear
We weren’t going to mention Hertz (Stock Quote: HTZ) here since they recently sued a research analyst that claimed the company would soon go bankrupt. However, the law suit was just dropped and we feel the people have a right to know. It’s nothing against Hertz though, it’s just a tough time for tire companies out there. As it turns out, Hertz and Goodyear are both in danger of bankruptcy this year due to mounting debt, according to Audit Integrity’s report. Hertz and Goodyear were both forced to slow down their tire production and cut thousands of jobs last year as people worldwide were buying fewer cars and driving less.
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In 2008, Borders (Stock Quote: BGP) books sales were so bad that the company actually considered selling itself. This didn’t end up happening, but sales continued to lag in 2009. The company has tried to fight off bankruptcy by cutting their expenses and reducing debt. But in the world of books, Borders is quickly becoming the third wheel to Barnes & Noble and Amazon. Meanwhile, across the Atlantic, Borders UK has already tanked, which certainly doesn’t seem too encouraging.
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Sprint (Stock Quote: S) was one of the companies mentioned on Audit Integrity’s list of companies most likely to go bankrupt this year. And they were also mentioned on SmarterSpend’s list, who cited their declining subscriber base and increasing debt as two main factors. If it sounds farfetched, other phone companies aren’t faring much better. Nortel, the largest maker of telecommunications equipment in North America, went bankrupt at the beginning of 2009. And then there’s AT&T. No one has had worse PR this year than AT&T. The Chief Executive of AT&T reportedly told a Goldman Sachs conference that he expects the company to “run at a flattish level” for much of 2010. But as PC Mag speculated, AT&T is losing customers due to poor service and the bad economy could force the company to cut down operations even more, or possibly go bankrupt.
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The U.S. Government
Yes, we know the U.S. Government is not a business (at least not in the traditional sense), but it’s in danger nonetheless. Individual states are already battling bankruptcy. The governor of New York declared last month that the state had run out of cash. And don’t even get us started on California, the most fiscally troubled state in the nation. But America as a whole could veer toward bankruptcy in the not too distant future. Recently, President Obama declared that the federal government “will go bankrupt” if health care costs are not tightened. And if it’s not health care, it could be social security. Even if the government stays afloat, the American people might not. The Associated Press reports that 1.4 million Americans filed for bankruptcy last year, an increase of 32 percent from 2008. If that trend continues, 2010 will be a sorry year.
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