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04/12/2011

Borders Bankruptcy Dominates Q1 Chapter 11 Filings

Borders Group was the highest-profile name among the six retailers seeking bankruptcy protection during the first quarter of 2011. What was bad news for Borders, however, may be a good sign for the economy as a whole: none of the five other retailers filing for Chapter 11 in Q1 come near Borders in size, scope or geographic footprint.

This is not to suggest that everything has turned rosy economically, and the news is certainly not good for the companies involved: apparel retailers Anchor Blue and Rugged Bear, apparel and home goods retailer Orchard Brands, consumer electronics chain Ultimate Electronics and gourmet food retailer Harry & David, famous for its Fruit-of-the-Month Club. However, the fact that Borders is the only large national chain among this group does suggest that the economic recovery is slowly but surely gaining traction.

In addition, Borders' troubles, like those of another recent Chapter 11 filer, Blockbuster, may have as much to do with technological changes as with overall economic woes. In e-commerce, Borders didn't introduce its own internally managed site until 2008, forcing it to continually play "catch-up" with the more established Barnesandnoble.com and Amazon.com. Similarly, Borders was a latecomer to the increasingly popular e-reader market, again allowing Barnes & Noble with its Nook and Amazon with its Kindle to establish market share dominance.

Like Borders, Blockbuster allowed other companies to outpace it in product delivery technologies and methods. Competitors such as Netflix, first with its snail-mail DVD deliveries and then with streaming video, and Redbox DVD rental kiosks, were able to leapfrog ahead of Blockbuster and compete effectively in the areas of delivery speed, price and convenience. What had been a decided advantage – a nearly ubiquitous network of brick-and-mortar stores – became a liability, and Blockbuster declared Chapter 11 protection in September 2010. Blockbuster's assets are being acquired by satellite TV provider Dish Network for $320.6 million in a deal expected to close April 21, 2011.

The pattern for this past quarter – six retail bankruptcies with one high-profile name among them – follows almost exactly a blueprint from the same period last year. The "big fish" among the six retailers that filed for Chapter 11 protection in Q1 of 2010 was the DVD rental chain Movie Gallery, which declared bankruptcy in February 2010 with plans to close more than 850 of its stores.

Following are the major retail bankruptcies in Q1 of 2011, with their filing dates:

Anchor Blue: January 11, 2011
Orchard Brands: January 19, 2011
Rugged Bear: January 25, 2011
Ultimate Electronics: January 26, 2011
Borders Group: February 16, 2011
Harry & David Holdings: March 28, 2011

Following are the major retail bankruptcies in Q1 of 2010:

E.R.T. Sales of Hawaii: January 12, 2010
Bernie's Audio Video TV Appliance: January 14, 2010
Southern Golf Partners: January 20, 2010
Movie Gallery: February 2, 2010
Swoozie's: March 2, 2010
BKV Inc., d/b/a Tellos: March 19, 2010

For related content see: Harry & David Declares Bankruptcy After Closing 50 Stores

Bankrupt Rugged Bear Chain Closes All 29 Stores

Borders Files for Bankruptcy, Closes 200 Stores

Orchard Brands and Ultimate Electronics File for Chapter 11 Protection

Anchor Blue Chapter 11 Filing is First Retail Bankruptcy of 2011