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More top brands seen disappearing in 2009

Many now on life support as the year-long recession persists Reed Saxon  /  AP
Linens 'N Things and other other names vanished this year, victims of the economy, the financial meltdown or other factors. Experts say 2009 could mark the end of even more brands as the now year-long recession puts more struggling companies on life-support. updated 1/2/2009 2:27:14 PM ET 2009-01-02T19:27:14

NEW YORK — Shoppers won't be picking up ornate lamps from the Bombay Co. in the coming year. Or investing with Lehman Brothers and Bear Stearns. No flying to Hawaii on Aloha Airlines or buying ultra-cheap tickets on Skybus, either.

All those names vanished this past year, victims of the economy, the financial meltdown or other factors. Experts say 2009 could mark the end of even more well-known brands as the now-yearlong recession puts more struggling companies on life support.

"I think 2009 is going to be a bloodbath," said Scott Testa, a marketing professor at St. Joseph's University in Philadelphia. "I think it's going to be very, very ugly."

For some companies, 2008 was no beauty. The woes of the nation's retailers began before the year even started. The Bombay Co., known for its home accessories and furnishings, filed for bankruptcy last fall and shuttered the last of its stores in January because of slow sales — an ailment that hurt other companies as the economic downturn turned into a recession.

The casualties weren't limited to retail. Travelers also bid adieu to some airlines in 2008 as jet fuel prices soared and consumer spending on extras like travel plunged. Aloha, ATA, Skybus and Champion Air all grounded their planes.

And two of the biggest names that disappeared this year took the economy and consumer confidence down with them.

Bear Stearns was headed toward collapse in March, awash in massive losses from toxic securities tied to subprime loans, before the government engineered a fire sale of the 85-year-old investment bank to JPMorgan Chase & Co. And the credit crunch that paralyzed the world economy only got worse after Lehman Brothers, a 158-year old company that helped finance America's railroads, became the biggest bankruptcy in U.S. history.


The ripple effect those two failures had on the economy was evident at malls across the nation. Consumers, already nervous about the falling value of their homes and the security of their jobs, curtailed their spending even more.

With sales and profits dropping this year and lenders leery of granting new credit, a number of retailers failed. Home goods seller Linens 'N Things began liquidating its stores after originally filing in May for Chapter 11 bankruptcy protection. Apparel chain Steve & Barry's did the same later in the year. Catalog retailer Lillian Vernon Corp. and specialty retailer Sharper Image Corp. also vanished. KB Toys is in the midst of restructuring its business and is liquidating its more than 400 stores.

Of all the brands to disappear in 2008, Testa said, consumers may miss department store chain Mervyns the most since so many shoppers had a connection to the store.

"That's a brand that's been around for a very long time," he said.

Mervyns, which had been operating for five decades, said in October that it would have to liquidate its stores after filing for bankruptcy protection this summer.

The store's faithful shoppers will likely seek out new places that have the brands and prices they want — or may just stop spending if they don't find a replacement that resonates with them as much, said Rita Rodriguez, chief executive for the U.S. division of The Brand Union, a firm that helps companies create brand identities.

That includes 10-year-old Abhijit Ramaprasad of Malpitas, Calif.

"We got most of our clothes there," he said. "We went more times than any other store."

He said he'll now have to go someplace like Kohl's or Macy's, but wasn't looking forward to that because those stores are so much bigger.

The vanishing acts weren't just in the U.S. British retailer Woolworths Group PLC collapsed late this year after it was unable to sell its 800-store business that was nearly 100 years old. The stores are closing in stages, with the last set to close Monday.

Beyond the brand names customers will no longer see, people may find many familiar businesses looking different. Retailers may operate far fewer stores or only sell their goods online. Banks may become subsidiaries of those that bought them or their names may be joined.

Circuit City Stores Inc., the nation's second-biggest electronics retailer, is closing more than 150 stores and laying off thousands of employees as it keeps operating and attempts to restructure under Chapter 11 bankruptcy protection.


After Bear Stearns' collapse, several other financial companies were able to stay alive by becoming subsidiaries of healthier banks. The names of those institutions remain, but are likely to fade away over time. Washington Mutual, for example, was bought by JPMorgan. The new owner plans to rename Washington Mutual's bank branches.

The shakeout among companies this year will give sturdier brands a chance to shine and set them apart from their less-than-prosperous counterparts, experts said.

Testa said the economic Darwinism will mean only the strongest stores survive, and they'll use the downturn to get more powerful.

"The really smart companies, when things are bad, take the opportunity to really grow their brand," he said.

Companies will have to find ways to stand out and that includes making sure customers picky about where they spend their money have a better experience, Rodriguez said.

"The brand is going to have a bigger opportunity to stand out and to articulate a promise and to deliver the experience," she said. "And it's going to have to do that in 2009."



 



Related: U.S. business , Bear Stearns, Aloha Airlines, Lehman Brothers


