15426 Fri, 10/17/2008 - 1:56pm
About $4.75 billion in home furnishings retail sales is up for grabs between Linens ’n Things and other retailers that have gone belly-up in the past 12 months.
While the expected liquidation of Linens, which did $2.8 billion in sales last year, is an epic blow to the home furnishings industry, the huge chunk of home sales the chain generated will be absorbed by retailers ranging from Wal-Mart to Kohl’s, vendors said.
The percentage of Linens’ home business that will disappear for good is unknown. Most experts say the home retail sector is already littered with too many stores and too many product lines.
While the scale of Linens’ expected demise is in a league all its own, the company will join a long list of other home retailers that liquidated this year.
The now-defunct chains Levitz, The Sharper Image, Bombay and Wickes abdicated about $1.8 billion in home furnishings sales when they went belly-up.
What’s more, bankrupt department stores Boscov’s and Mervyns closure of 10 and 26 stores, respectively, will add about $154 million in combined home sales to that figure.
But it’s Linens’ expected liquidation “that will have a titanic effect on the domestic vendor community,” said David Zrike, president of tabletop resource The Zrike Company.
A portion of Linens’ home sales will be absorbed by retailers buying store locations and consumers shopping other chains.
“The business that Linens ’n Things did won’t disappear,” said Jeffrey Siegel, chief executive officer of Lifetime Brands. “Other [retailers] will get that business even if they don’t take the stores.”
Chances are “some of the locations will end up with other retailers like Bed Bath & Beyond,” Siegel said. Other merchants will pick up some locations, “and we as vendors will pick up business that way over time.”
Chains with locations in neighborhoods where Linens operated stores will inherit some of the sales.
“That home business will be absorbed by Wal-Mart, Target and Bed Bath & Beyond,” Zrike said.
But while Wal-Mart and Target will likely gain share from Linens, much of that business may not go to domestic vendors. Instead, it will go to the chains’ factories, Zrike said. That’s because the discounters are bypassing domestic suppliers more and sourcing direct.
And some of the business will simply evaporate, suppliers said.
“This will result in a long-term reduction in the overall home market that will not be absorbed because there is really no need for it,” Zrike said. “The home industry is oversaturated.”
In addition to being overstored, home retailers are “overassorted,” with too many private brands and exclusive brands, he said, noting Linens’ failed proprietary home line from Nate Berkus, the designer Oprah Winfrey put on the map.
Vendors who counted Linens ’n Things among their biggest retail accounts will feel the sharpest sting, said Sal Gabbay, executive vice president of Gibson Overseas.
But Gibson, like others, saw the writing on the wall. It sought factor insurance and had been doing less business with the chain.
“Because we were factored, we were not exposed,” Gabbay said. “They were a big account at one time.”