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PeterDe
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Barnes & Noble to Go Bankrupt Next, Poll Says

Barnes & Noble to Go Bankrupt Next, Poll Says Jeanine Poggi

04/28/11 - 08:31 AM EDT

NEW YORK (TheStreet) -- Investors expect Barnes & Noble(BKS ) to be the next retailer to file for bankruptcy, according to a poll of TheStreet readers.

Last week, TheStreet analyzed the risk of retail sector companies through the Altman Z-Score, a formula developed by New York University professor Edward Altman in 1968. The Altman Z-Score measures several aspects of a company's financial health to forecast the probability of it going bankrupt within two years. Since its inception, the formula has been 72% accurate in predicting corporate bankruptcies two years prior from the filing.

> Bankruptcy Scores: 20 Risky Retailers

On a general basis, companies with a Z-Score of higher than 3 are considered safe, while those with a score of 1.8 or lower are considered distressed. Anything in between is a gray area.

TheStreet found 20 retailers that had a Z-Score under 3 in 2010. After analyzing each, we asked readers to predicted which, out of five of these companies -- American Apparel, Barnes & Noble, Rite Aid, Zale and Supervalu -- was most likely to file for Ch. 11 next.

>Bankruptcy Scores: 18 Riskiest Retail Stocks of Summer 2010

Barnes & Noble earned the most votes -- a dubious honor, to be sure -- with 31.1% saying it would follow in the way of rival Borders. The book-selling giant put itself up for sale last summer, but has yet to find a buyer, which has left investors worried about the future of the company.

It is little secret that the book industry is in shambles, as digital content becomes king, leaving traditional brick-and-mortar stores playing catch up to Amazon(AMZN) and Apple(AAPL).

And Border's bankruptcy in February only added to Wall Street's jitters. Shortly after its Ch. 11 filing, Barnes & Noble declined to provide guidance for the remainder of the year and suspended its dividend in an effort to preserve liquidity.

While Barnes & Noble is hoping to ride the success of its Nook e-reader, TheStreet readers don't believe this will be enough to help it stave off bankruptcy.

American Apparel, unsurprisingly, came in a close second, with 26.8% of readers saying the t-shirt retailer was next to go bust.

The retailer, which is better known for its racy advertising than its product, warned in April that it may have to file for bankruptcy if it is unable to improve its sales or cash position or find other sources of financing to keep it afloat.

But at least for now, bankruptcy fears have waned after American Apparel received rescue financing last week. Great White North, which also bailed out Jamba(JMBA), agreed to inject about $40 million into the flailing t-shirt retailer. As part of the deal, the investors will immediately give American Apparel $15 million, and during the next six months will retain the right to buy nearly one-third of the company's shares at just 90 cents each.

But this doesn't mean a bankruptcy is off the table. Larry Perkins, head of West Coast operations for Conway Mackenzie, a restructuring firm, says the infusion buys American Apparel about one to two quarters. But if the company doesn't figure out how to fix its business model during that time, bankruptcy is still an option.

Rite Aid came in third with 23.9% of the votes while just 12% believe Zale is teetering on the brink of bankruptcy.

In February 2010, TheStreet readers predicted that Zale was the next bankruptcy in the sector.

At the time, the jeweler faced a massive executive shakeup, a prolonged decline in sales, and investigation by the Securities and Exchange Commission, and financing issues.

But since then, Zale has cut costs through store closures, seen its sales recover during the all-important holiday season, and was cleared by the SEC.

Supervalu appears to be the retailer least likely to go under out of the five, with just 6.1% predicting the grocer will file Ch. 11.

--Written by Jeanine Poggi in New York.

 

http://www.thestreet.com/story/11096246/1/barnes-noble-to-go-bankrupt-next-poll-says.html

Some people can't see the forest for the trees!

4 Nook Household, 2 NOOKs, 2 NOOKcolors
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richardwrite25
Posts: 859
Registered: ‎03-12-2011

Re: Barnes & Noble to Go Bankrupt Next, Poll Says

Two reasons I'm not concerned on a personal level:

 

1) Filing for bankruptcy will not mean the end of the company. It will just be a restructuring of debt, maybe shutting down a bunch of stores.  But since the Nook business is the most successful part of the business, as long as they exist, it will continue to be supported.

 

2) By the time they go out of business, there will another "latest and greatest" thing available that will take its place in my heart.

 

3) In the meantime, even if they went completely out of business tomorrow, rooting the Nook turns it into a tablet that is not at all dependent on Barnes & Noble even existing.

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mariel9898
Posts: 769
Registered: ‎01-08-2011

Re: Barnes & Noble to Go Bankrupt Next, Poll Says

Bankruptcy doesn't mean much of anything in the corporate world anymore. Just ask Donald Trump!

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beeyebickiebuy
Posts: 513
Registered: ‎03-21-2011

Re: Barnes & Noble to Go Bankrupt Next, Poll Says

 


mariel9898 wrote:

Bankruptcy doesn't mean much of anything in the corporate world anymore. Just ask Donald Trump!


Do you think that he will show us his college transcript?

 

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Serolf_Divad
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Registered: ‎02-28-2011

Re: Barnes & Noble to Go Bankrupt Next, Poll Says

I don't think there's an immediate risk of a B&N bankruptcy, but I do think that the Nook Color is the retailer's Hail Mary Pass.

 

They have to make the Nook Color (and devices that follow) work, or else they will join Blockbuster and Borders in bankruptcy court. Content is going digital. The move is steady and inexorable. if you're selling ideas (rather than widgets) you've got to get those ideas into a digital format if you hope toi survive.

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cbtengr
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Re: Barnes & Noble to Go Bankrupt Next, Poll Says

 


beeyebickiebuy wrote:

 


mariel9898 wrote:

Bankruptcy doesn't mean much of anything in the corporate world anymore. Just ask Donald Trump!


Do you think that he will show us his college transcript?

 


I'd like to know who does his makeup and hair!

 

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richardwrite25
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Re: Barnes & Noble to Go Bankrupt Next, Poll Says

 


Serolf_Divad wrote:

I don't think there's an immediate risk of a B&N bankruptcy, but I do think that the Nook Color is the retailer's Hail Mary Pass.

 

They have to make the Nook Color (and devices that follow) work, or else they will join Blockbuster and Borders in bankruptcy court. Content is going digital. The move is steady and inexorable. if you're selling ideas (rather than widgets) you've got to get those ideas into a digital format if you hope toi survive.


You're right.  I've been involved in print media my whole life....in the mid 2000s, as a reporter and editor for a weekly newspaper. The paper was bought out by Gannett and then shut down (so we wouldn't compete with their local daily for ad dollars).  That was actually the best thing that could have happened to me, because it forced me to go into business for myself. And my new focus is ghost-writing blogs for businesses and websites.  In a nutshell, Gannett getting rid of my job forced me to focus on creating digital content as my new career.

 

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akaCat
Posts: 170
Registered: ‎03-06-2011

Re: Barnes & Noble to Go Bankrupt Next, Poll Says

 


cbtengr wrote:

 


beeyebickiebuy wrote:

 


mariel9898 wrote:

Bankruptcy doesn't mean much of anything in the corporate world anymore. Just ask Donald Trump!


Do you think that he will show us his college transcript?

 


I'd like to know who does his makeup and hair!

 


So that you can avoid them like the plague?

 

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riffrafff
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Re: Barnes & Noble to Go Bankrupt Next, Poll Says

Hmmm.  Maybe, if they reorganize, they can afford to pay IT personnel that actually test their patches before they are pushed out.  :smileywink:

 

Better yet, maybe they can hire someone who can add a "Accept new Update? yes/NO?" dialog.  :smileyvery-happy:

 

 

 

COME...to the Dark Side.

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PeterDe
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Re: Barnes & Noble to Go Bankrupt Next, Poll Says


riffrafff wrote:

Hmmm.  Maybe, if they reorganize, they can afford to pay IT personnel that actually test their patches before they are pushed out.  :smileywink:

 

Better yet, maybe they can hire someone who can add a "Accept new Update? yes/NO?" dialog.  :smileyvery-happy:

 

 

 


Riff, come on, we know they spent their entire beta testing budget on creating a photoshopped pictures of tilted book covers that can't actually be done in real life!

Some people can't see the forest for the trees!

4 Nook Household, 2 NOOKs, 2 NOOKcolors
DRV
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DRV
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Re: Barnes & Noble to Go Bankrupt Next, Poll Says

[ Edited ]

 


PeterDe wrote:

On a general basis, companies with a Z-Score of higher than 3 are considered safe, while those with a score of 1.8 or lower are considered distressed. Anything in between is a gray area.

TheStreet found 20 retailers that had a Z-Score under 3 in 2010. After analyzing each, we asked readers to predicted which, out of five of these companies -- American Apparel, Barnes & Noble, Rite Aid, Zale and Supervalu -- was most likely to file for Ch. 11 next.


 

Wait.  They have this formula that's 72% accurate, right?  Higher than 3 is good.  Below 1.8 means a company is distressed.  In between is a gray area.

 

So they find 20 retailers with scores below 3, BN among them, then they do a poll?

 

Why not just look at what their actual scores are with the moderately accurate formula and let them speak for themselves?  As it is, we don't know whether BN is at 2.9 or 0.1.  Wouldn't that be as important to know as a poll of readers of a blog?  Sounds lazy to me.

 

Mark_OB1
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Re: Barnes & Noble to Go Bankrupt Next, Poll Says

 


DRV wrote:

 


PeterDe wrote:

On a general basis, companies with a Z-Score of higher than 3 are considered safe, while those with a score of 1.8 or lower are considered distressed. Anything in between is a gray area.


 

Wait.  They have this formula that's 72% accurate, right?  Higher than 3 is good.  Below 1.8 means a company is distressed.  In between is a gray area.

 

So they find 20 retailers with scores below 3, BN among them, then they do a poll?

 

Why not just look at what their actual scores are with the moderately accurate formula and let them speak for themselves?  As it is, we don't know whether BN is at 2.9 or 0.1.  Wouldn't that be as important to know as a poll of readers of a blog?  Sounds lazy to me.

 


 

If you go back to the source, you'll find that the actual Altman Z-Score for B&N was 2.66 in 2009, and 2.11 in 2010.

 

Of course, predicting doom for any of those companies on the list will have no impact whatsoever on their chances.  :smileyindifferent:

 

- Mark