The Unforseen Effects of Covid

 

The latest victim of the post-Covid economy is Christmas Tree Shops (CTS) which filed for Chapter 11 bankruptcy protection and failed to meet its payment obligations. Management had agreed to close ten stores under its original plan and now is required to close all seventy-two stores from Maine to Delaware.

 This was not the first time the fifty-three year old company was in this position. In 2003, Bed Bath & Beyond (BBBY) purchased the company for $200 million. Then, because BBBY was having its issues, Handhil Holdings LLC purchased CTS in 2020 for an undisclosed amount of money.

 Recently, BBBY was forced to close all its stores for essentially the same reason, the inability to meet its bankruptcy loan obligation. But unlike CTS, the bankruptcy court approved Overstock.com to buy the Bed Bath and Beyond name to use it in its brand name, online website business, customer database and loyalty program, but not its retail stock or brick and mortar locations.

In addition, Overstock will not be able to acquire Buy Buy Baby, the baby merchandise retailer that BBBY bought in 2007. However, within a few weeks, you will see the name changes in both Canada and the United States. And access to the wedding registry would continue.

 Buy Buy Baby will be subject to a separate auction Wednesday for its intellectual property and Thursday for its physical locations.

 The retail business has been in freefall for several years due to the successes of Amazon, Walmart, Target, Costco, Wayfair, and even Overstock.com, and other electronic/digital businesses since Y2K. Malls across America have begun closing, leaving huge wastelands in their wake. Landlords are struggling with what to do with properties which bring no recurring, anticipated rental income to pay taxes and maintenance for their mortgaged real estate.

 Soon enough, all this will be felt by all of us, in prices, availability and convenience. This phenomenon is not recent; it has been ongoing for many years. But the pandemic forced us to stay home to do our shopping and since then our shopping habits were easily altered.

 While CTS and BBBY are the latest retailers to fail, they certainly will not be the last. Similar to the retail banking industry, there will be companies which are too big to fail. Or at least that is the belief. But it will change on a dime if companies like Macy’s or Walmart meet the fate of Bed Bath and Beyond and Christmas Tree Shops.

 What then? There is no FDIC-type agency to bail out retail businesses like the FDIC managed to bail out banks. Will the people be able to combine resources to save Best Buy or Home Depot should these companies falter? Bain Capital tried to save Toys R Us and failed. But the lesson was then learned to let retailers claim bankruptcy should management become inept.

 Finally, will we be limited to shopping for items online, never to set foot in a big-box store again? Perhaps. The Star Trek twenty-third century is becoming more like a reality every day, with debit cards, laptops, tablets and cell phones, and all sorts of gadgets which did not exist in 1965. Certainly, online shopping was not even a consideration.

The Final Frontier may well be upon us. And it is two centuries earlier than anyone imagined.

 Thank you, Covid.