Growing speculation surrounding Linens ‘n Things, one of the biggest housewares and homewares retailers in the US, was confirmed on Friday when the company filed for Chapter 11 bankruptcy protection.
The move means that the retailer will be safe from the threat of creditor lawsuits while it restructures its finances and closes a significant number of under-performing stores.
Linens ‘ n Things, second only in size within its market to Bed, Bath & Beyond, is one of the highest-profile casualties of the troubled US economy, which has seen the housing and credit markets suffer, and hit consumer spending – particularly within homewares.
The company is also considered to be disadvantaged by operating out of older sites and stores too small to offer sufficient depth and range of product.
In recent months nervous suppliers have compounded the retailer’s woes by reining back on credit and product supply.
Linens ‘n Things lost $242m in 2007 – a year after private investment firm Apollo Management took the company private for $1.3bn.
The retailer, which employs 17,000 people and has almost 600 stores across the US, will now close 120 of them, around a quarter in California. Its Canadian stores are not affected by the bankruptcy petition.
There were fears last week that over $40m-worth of gift cards held by 400,000 customers would be frozen in the filing as they are viewed by the bankruptcy court as debt. However, yesterday the company reassured customers that they would still be able to redeem the cards, and wedding registries will also remain available.
US analysts say that Linens ‘n Things’ troubles are likely to benefit rival Bed, Bath & Beyond.
“The number of stores Linens ‘n Things is closing is equivalent to almost 15% of Bed, Bath & Beyond’s core store base,” said John Murphy of William Blair & Co, “so there is significant opportunity to gain market share.”
Another analyst pointed out that half of Bed, Bath & Beyond’s stores currently had a Linens ‘N Things store within three miles.