Companies That Could Go Bankrupt - Opinion
BOSTON (TheStreet) -- It doesn't take an auto-repair shop in an old Circuit City building or a "for lease" sign over the QuickDrop slot in an old Blockbuster storefront to remind consumers that even the strongest companies can be bowed by bankruptcy.
Blockbuster's video empire and A&P's (GAP) nearly 150-year-old food retail business were among the businesses that declared bankruptcy this year, but were far from the only ones in financial peril. TheStreet took a look at some companies' recent struggles and identified 10 for whom bankruptcy may be beckoning, either next year or the not-so-distant future. Some balance sheets and share prices hide the pain better than others, but all of the following have fundamental flaws in either their business plan or management that lead to situations like A&P and Blockbuster's -- where what was unthinkable even five years ago may seem inevitable soon enough.
So let us get this straight: Your company's trading at just over a dollar a share on a good day, former CEO Ron Marshall found a gig at bankrupt A&P more promising and Borders as a whole has struggled through recent rounds of layoffs and at least 180 Waldenbooks store closures -- and shareholder William Ackman still thinks it would be a great idea to buy Barnes & Noble (BKS)? That kind of ink-sniffing logic, and Borders' management's support of it, makes even the most patient reader want to flip to the end of this sad chapter. In multimillion-dollar debt, facing increasing e-book competition from Amazon (AMZN), Apple and Google and watching its Kobo e-reader mire itself in fourth place or worse among competitors such as the iPad and Kindle, Borders and its shareholders can't honestly expect this literary megamerger to reach a promising conclusion when their company can't even read the writing on the wall.
Walgreens (WAG) just took over Duane Reade and grabbed a huge foothold in New York, ever-expanding CVS Caremark (CVS) sits at No. 18 on the Fortune 500 and Wal-Mart (WMT) and its discount prescriptions continue to elbow their way into traditional health, beauty and pharmacy strongholds. How does primarily East Coast Rite-Aid respond? By cutting guidance, continuing losses that extend back to its 2007 purchase of Brooks Eckerd, giving up South Carolina locations to SuperValu's (SVU) Sav-A-Lot stores and shuffling the deck chairs by moving Chief Operating Officer John Standey to chief executive and keeping former CEO Mary Sammons on as chairman. Though stock prices have rebounded from last year's low of 20 cents, Rite-Aid is still trading under a dollar as the company deals with crushing debt. Rite-Aid says it will fill fewer prescriptions than previously expected in fiscal 2011, which is just as well -- there doesn't seem to be any cure for what's ailing this company.
Time Warner may finally be atoning for the past after its split with AOL last year, but AOL's upward trajectory compared with Time Warner's uncertain and somewhat stagnant path has to be troubling for even the staunchest supporters of this media titan. DVD sales continue to suffer, streaming is cutting into Time Warner's take and while viewers wait for that HBO streaming venture, properties such as GE-owned (GE) NBC, Fox and Disney-owned (DIS) ABC's Hulu joint venture and Netflix continue to take turkey off of Time Warner's plate. Regardless of the might of current holdings such as HBO, Turner Broadcasting and Warner Entertainment, Time Warner still has billions worth of debt and that little Time portion that's turning into a big, paperweighted drain. Bankruptcy? Improbable, but not out of the question.
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