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Coldwater Creek Bankruptcy Is Not a Canary in the Coal Mine

Paul Ausick

After failing to find a buyer, struggling women’s clothing retailer Coldwater Creek Inc. (CWTR) has filed for Chapter 11 bankruptcy protection while it liquidates its stock and closes its stores. The company was founded in 1984 and operates a mail-order business as well as 334 retail and 31 factory outlet stores.

Coldwater Creek, based in Sandpoint, Id., has been in a very competitive business. Other women’s specialty retailers like Chico FAS Inc. (CHS), Christopher & Banks Corp. (CBK), and Ann Inc. (ANN) have faced their own difficulties. Chico’s hasn’t met earnings estimates for five consecutive quarters; Christopher & Banks is expected to post negative same-store sales for the first quarter; and Ann’s first quarter comparable sales are forecast to be even worse.

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Chico's got a boost last week when private equity firm Leonard Green & Partners LP disclosed that it had taken a 1.3% stake in the company. Leonard Green owns stakes in a number of retailers, including J. Crew and Sports Authority. The private equity firm paid $1.6 billion in 2010 for fabric and craft retailer Jo-Ann Stores. And that could be all the good news for a while.

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But that’s about all the good news there is for these retailers. Specialty retailer Brookstone is preparing a bankruptcy filing. Three other clothing retailers -- Ashley Stewart Holdings Inc., Dots LLC, and Loehmann’s Inc. -- have already filed for bankruptcy protection. Retailing’s always been a tough business, and it’s not getting any easier.

Coldwater Creek’s bankruptcy is not a harbinger of anything, nor is it a one-off. There are more reasons for a specialty retailer to fail than there are to succeed: inability to keep up with the fast-changing fashion scene, poor locations, weather, a lousy website and, of course, very stiff competition.

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Coldwater Creek is just another victim of what was once a successful business model that management didn’t move fast enough to change. That story will repeat itself several more times in the months and years ahead.

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