Wednesday, February 11, 2009

15 Companies That May Not Make It This Year

Hey there. I haven't had much time to post here since I've been working too hard and tired as hell once I get home. Being a credit analyst, I've been burying my head in balance statements and profit & losses for all kinds of companies to assure that we will not lose money on companies that we do business with. With that being said, I stumbled on an article in Yahoo Finance about 15 companies that may not make it through 2009. Here is my take on those 15 companies.

Rite Aid: I like Rite Aid. I shop there every now and then and it's basically a suped up liquor store. The problem? Their pharmacy. Because they invested much in the pharmacy side of Rite Aid, the comp. is losing out to Wal-Mart now that Wal-Mart offers pharmacy services. Many are ditching the Rite Aid pharmacy to hit up Wal-Marts since customers can also buy other items at discounted prices.

Claire's Stores: My wife loves this store. Each time we're at the mall, we need to stop by Claire's or Icing (same company) for little nick knacks and girly accessories. The problem with this is that it's in a mall. Many consumers are just not hitting the malls since many don't have that extra cash to spend. Since the company specializes in accessories, this economy is hurting the company since many of us can live with out the glittery clip or starry hair bands.

Chrysler: This one is a tough one to swallow. The gov. has already provided the company with bailout money and they're burning right through it. It also doesn't help that the higher ups insist that the company is not going out of business. Are they trying to convince us? Or trying to convince themselves? The fact that their main inventory consists of gas guzzling SUVs and trucks are not helping either.

Dollar Thrifty Automotive Group: This small chain of rental cars will suffer due to Chrysler, since Chrysler provides approx. 80% of the cars that the automotive group rents out. No cars, no company. Simple as that.

Realogy Group: This is the biggest real estate firm in the country and that's why it's in trouble. The housing market has been in a nose dive since late 2007 and all the losses are tearing this company apart. They've attempted to refinance most of their debt to no avail. When the largest real estate firm is having trouble refinancing, you know they're in trouble.

Station Casinos: This one is a no brainer. No money to toss around at the gambling table. Coupled with the fact that this is a home grown business that is native to Las Vegas, this is one business that does not have the big dollars backing it up like some of the well known casinos on the Vegas Strip.

Loehmann's: Like every other retailer out there, it's feeling the pinch of consumers not spending money but Loehmann's just doesn't have the cash to keep the company afloat. It may very well follow the likes of Mervyn's and Gottschalks and simply run out of money to keep the business open.

Sbarro: This one's in trouble for the same reason Claire's is. They are in a mall and people just don't spend the money on pizza while at the mall. To make matters worse, they can't offer additional items since the store is only open during mall hours so a breakfast or late night menu is not an option. Consumers love options and this company just doesn't have any.

Six Flags: This one hurts. I love Six Flags. We go about once a year during one of our mental health days that my wife and I take. The problem here is that the company is just not making money. It's been losing money for years and many of the parks are for sale to private investors and unless someone comes up with the cash to make this place profitable, it's just not going to make it. In California, Six Flags has a bad rap. There have been incidents involving gang violence and disturbances that just give the theme park a negative connotation. Being a family man, I'd rather take the kids to Disneyland or Knotts Berry Farm where I know that the kids are less likely to encounter a problem. I'm sure I'm not the only one thinking that way.

Blockbuster: This goes for all video rental places that have a brick and mortar place of employment, online video rental is the way of the future. Netflix and other online video rentals just make it too easy for customers to rent what they want and receive movies without leaving their home. Not to mention that a monthly subscription, at a low price, makes it more affordable than other places. And now that Netflix can stream via a XBOX 360 or on their latest product, The Netflix Player by Roku, other video rental companies simply cannot compete.

Krispy Creme Donuts: I love me some donuts. The company figured that many Americans do as well. The problem? They opened too many stores too quickly. They expanded right before the housing market came down, forcing many of the locations to default on leases since they could not negotiate new leases. This caused for many of those locations to close down. That trend will more than likely continue this year.

Landry's Restaurants: This one is 50/50. They own well known cafe's such as the Rainforest Cafe and Chart House. The problem here is that they are in the middle of a buyout where the company needs $400 million in funds to finalize the deal. Some banks have already shut them down so it doesn't look good. If a bank gives them the money they need, they can ride this storm out.

Sirius Radio: This was a problem the moment this company started. Many will not pay for something that is already free. XM was in the same boat but merged with Sirius to keep the company alive and reduce losses. Now, they are both sinking and because they have huge contracts that need to be paid (*cough *cough Howard Stern *cough *cough), the company is just not profitable.

Trump Entertainment Resorts: The Donald has been in hot water for years now. Each time he's managed to get out of it by using his persona to get extensions on late payments. Now that the real estate market is still in the dumps, The Donald may be able to talk himself into any more extensions. Especially since a good portion of his properties are in the casino business.

Bearing Point: To be honest, I don't know much about this company other than that it is a consulting firm. Per Yahoo, "The firm is consistently lost money, revenue has been falling, and management stopped issuing earnings guidance in 2008... With a key interest payment due in April, management needs to hustle - or devise its own exit strategy."

There you have it, 15 companies that may not make it. I expect to see many clearance sales on these in the coming months. Later.

3 comments:

Always love those things. I could actually see some of that stuff happening around Casa de Hawg.

I am skeptical about the inclusion of Loehmann's in the list. Of course the company has issued the normal denials, but this time I believe them. As the original article states, they *do* have the right formula for success in difficult times, desirable merchandise at discount prices. The key thing to remember about Loehmann's is that they have a veritable *cult* surrounding them. Their new Loehamnns' FaceBook Fan Page looks like it's going to get to 5000 fans within 24 hours after launch.

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