More hard times seen for U.S. retailers

By Chelsea Emery and Martinne Geller

NEW YORK (Reuters) - The long-predicted surge of U.S. corporate bankruptcies could be around the corner, and retailers in particular could be among the hardest hit, bankruptcy and restructuring experts said on Tuesday.

"People have been projecting a restructuring boom coming in the next 18 to 36 months for the last 48 months, and we may finally be seeing the truth to those projections," said James Sprayregen, managing director of Goldman's investment banking division. He was speaking at the Reuters Restructuring Summit in New York.

A number of retailers, including home goods company Linens 'n Things, filed for bankruptcy protection this year as higher food and fuel prices and job losses forced consumers to cut back on spending. A global credit crisis that has rocked financial markets has exacerbated problems for companies.

"I think there's a lot more pain to come in the retail area, and I think you're going to see it spread all over retail," said Sprayregen. "It goes to the ones that have expanded into a lot of places where they don't need to be, it goes to the ones whose cost structure is out of whack, it goes to the ones whose products are not necessarily differentiated or needed by the public."

The climate is so rough, Sprayregen said, that the conventional wisdom that high-end retailers are insulated from economic slowdowns is no longer true.

"That's played out sort of, but not completely, this far in 2008," he said, noting that many luxury goods chains have had sluggish sales. "I'm not sure anybody's insulated at this point."

Earlier this month, upscale department stores Saks Inc (SKS.N) and Nordstrom Inc (JWN.N) reported steeper-than-expected declines in August sales at stores open at least a year.

HOLIDAYS THE ACID TEST

The holiday season will be a make-or-break time for retail companies already struggling.

"There are companies out there that might have enough liquidity to get through the (holiday) season and if they don't have a good season, they're not going to make it," said Sun Capital Partners Inc managing director Gary Talarico at the Restructuring Summit.

Sun Capital owns retail and consumer companies including Hickory Farms, Bruegger's Bagels and Limited Stores.

This is likely to be the worst season for retailers since at least 2002, said Talarico.

"We're in a recession, there's just no doubt about it. I don't care what the economists like to define it as."

Retailers can generate up to 40 percent of their annual revenue in the months leading up to Christmas at the end of December.

A failed holiday season has often triggered bankruptcies for retailers, Sprayregen said, and tighter credit is making this year particularly tough.