Blog: Leonie BarrieTurnaround plans in a spin

Leonie Barrie | 4 August 2008

Department store chain Mervyn's is the latest US retailer to join an ever-lengthening list of companies who have filed for bankruptcy this year. The company says it has US$465m debtor-in-possession funding, and intends to remain open during the bankruptcy process. But a long-term turnaround plan put into place earlier this year, which included a focus on markdowns and promotions, has clearly proved to be less then effective in recent months as the retail market has slowed.

Its future, and that of other mid-tier retailers, depends on whether or not it can find another way to draw back consumers who are currently seeking bigger bargains at discount stores.

It’s a dilemma also facing women's apparel retailer Christopher & Banks Corporation, which is to shut its loss-making Acorn store chain by the end of this year, with around 80 full-time and 200 part-time workers losing their jobs. Going forward, the move will enable the company to focus on its two core brands, Christopher & Banks and CJ Banks.

Another company that’s been forced to evaluate the long-term future of one of its units is footwear firm Stride Rite Corporation, which has decided to close the Canadian headquarters of its Robeez babies' and infants' shoe division. More than 300 jobs will be lost through the closure, including about 250 in manufacturing. It is also switching back-office functions to the US, where it believes there are more opportunities for global expansion and new product lines.

China, meanwhile, has confirmed it is to raise tax rebates on a range of textiles and garments to 13% from 11%, in a bid to boost exporters struggling with surging costs and slower demand. The change, which came into force on Friday (1 August), is designed to provide some respite from a raft of cost increases this year from raw materials to higher labour costs resulting from a new labour law and the strengthening yuan.

Also on the trade front, the Doha round of world trade talks collapsed last week. The round's non-agricultural market access (NAMA) talks were set to reduce protective duties on some textile and clothing products – although there were also fears that bringing down trade barriers would do more harm to the world's poorest garment-making countries than the restrictions themselves. Discussions are likely to continue, observers say, but not until next year.


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