UrbanSwirl.com - Lifestyles of Color

Regional retail giant Boscov's is in dire finanical trouble, and has filed for bankruptcy protection.  In addition, Boscov's has announced the closure of several stores , effective immediately.

Regional department store chain Boscov's Inc. Monday filed for Chapter 11 bankruptcy protection and said it would close 10 stores, including anchors in three of the Baltimore area's largest malls, as the company suffers from slumping sales amid the housing and credit crunch.

Boscov's, based in Reading, Pa., will begin liquidation sales immediately and will close those "underperforming stores" when the entire inventory is sold, which officials estimate will take one to two months. About 1,400 employees, including about 400 in the Baltimore area, will lose their jobs.

Officials from the 49-store chain said in court filings and interviews that the collapse in the housing market, skyrocketing energy prices and higher food costs cut the discretionary spending of its shoppers and in turn put pressure on the company's finances. The decline also emerged after the 87-year-old privately held company began an aggressive expansion strategy into new markets two years ago.

Sigh.  More casualties of the rotten economy.  More people without jobs. 

Businesses are finding it harder and harder to survive in this climate. These closures of anchor stores, are going to leave giant empty hulks in many malls.  These will be difficult for landlords to fill, there aren't many anchor worthy retailers left.  Empty retail space equals lost money for landlords, who in turn may not be able to pay their property loans...more foreclosures, more job losses, and so on and so on.

Boscov's joins a list of retailers who have declared bankruptcy in recent months as consumers spend less, including Bombay Co., The Sharper Image, Linens & Things and Lillian Vernon. The California-based department store chain Mervyns LLC filed for bankruptcy protection last week as sales dropped because of the weak real estate market.

"The situation is totally unstable," said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail and investment banking firm in New York. "We're going to see 7,500 to 8,000 stores close this year."

This is clearly going to get worse before it gets better.  It's really quite simple.  People lose their jobs, they can't pay their bills, so they stop buying stuff.  If people stop buying stuff, the stores can't make money.  If the stores don't make money, they close.  If the stores close, more people lose their jobs. Rinse, repeat. 

This is a giant circle of pain, with no break in sight.