Personal Finance QuickTake: Bankrupt Brands

Sharper Image and Lilian Vernon announced that they were declaring bankruptcy today according to USA Today. Hit by slower than anticipated Christmas Sales as well as a lackluster year both brands announced separately that they have filed.

The real question is, Is this a one-off issue with poor performing brands, or the start of something big? According to the report some are predicting that this is the beginning of an avalanche of bankruptcies by companies.

From the report:

"You'll see a record number of bankruptcies over the next 50, 100, and 1,000 days," said Burt Flickinger III, managing director of the New York-based retail consulting firm Strategic Resource Group. "Consumers are cash and credit constrained. They're out of purchasing power."

The International Council of Shopping Centers projects 2008 store closings could reach 5,770 stores in 2008, the largest number of closings since 2004. Retailers as a whole reported their worst January same-store sales in almost four decades.

Flickinger said the problem is partly food and fuel inflation. While consumers used to pay 10 cents of every dollar for food and fuel, they now pay up to 20 cents per dollar.

What this means

As the Consumers go, goes the economy. The weaker die off first, but it is really the symptom of the larger issue that the economic boom of the last few years has been fueled by debt. Debt often obtained via Real Estate. That has dried up. Credit Cards are full. Where is the next wave of buying going to come from? And what happens if it doesn't.

What happens is, that we go into a recession. If we aren't prepared for it it will be twice as hard.

The Christmas Gift Returning Bandito...

Let me first say that I am a very grateful and gracious person, not to mention humble...OK, I fail at all of those often, but I do have a big ol' soft spot; presents.

I enjoy getting them, and I truly do appreciate the effort that one goes through. You have to decide what to give (which is the hardest part for me), you have to buy it, then wrap or ship it and wait to hear the reaction (my second hardest part of the gift-giving experience).

This empathy may go to far though based on what I know about retail. January is a great sales month for stores.

Know why? People return items and then add in some "Grandma Money" and buy what they really wanted. Add this to the grundle of broken things that aren't directly replaced and you probably have 10% (a number completely pulled out of my mistletoe) of gifts that don't stick.

Confession time: I can't do it...I feel too bad to return something. I think the only time I have returned something is when it was broken and I actually liked it. I was the only one excited to get the same item back from customer service!

I am normally a very practical person. I have no problem when someone returns something I gave them. I want them to enjoy their gift. My wife and daughters have no issue returning anything. Their dying great-grand Uncle could have bought them a gift, told them the meticulous planning that went into getting it, and then the next day they will be in line ready to exchange it for a Narato backpack. Well ,at least my daughter would.

I really think it is Rankin-Bass' fault. Who are they? All of those Christmas shows that are playing right now with the faux 3D people...You know, "Rudolph the Red Nose Reindeer"...

Anyway Rudolph and this wannabe Dentist Elf go on an adventure (you would have to see it, that made it sound like a Tarantino movie) and they find the Land of the Forgotten Toys. Toys no one wanted...totally depressing. Kids in third world countries asking for bread and kids just dumped these poor toys. Sure the Elephant has a Pirate Hook and lead paint, but come on, cut him some slack...But I digress...

For me it really is the thought that counts. It may mean that I won't get the Super Death Star I wanted, but at least my Light-up Reindeer tie won't get deported to that horrible island and I won't feel like the guy in the picture...