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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

June 10, 2009 at 9:30 AM

Eddie Bauer’s troubles are familiar for retailers, but worse

Top of the News: More trouble for a metro Seattle company with word that Eddie Bauer may be forced to seek Chapter 11 bankruptcy protection as early as this week. Now based in Bellevue, the iconic company opened its first store in Seattle in 1920.

The obvious culprits are familiar. First, the company is overleveraged, with $198 million in long-term debt. And that left it especially vulnerable for the second force, the abrupt nosedive in consumer spending that has claimed numerous retailers.

Since October, the shares have fallen from $8 to around a quarter — claiming, no doubt, many sentimental Puget Sound investors, just as Washington Mutual did.

Even so, Eddie Bauer has underperformed its peers. The aggregate performance of apparel company shares tracked by Dow Jones is off 46 percent, but Eddie is down 67 percent. A sale to a private-equity outfit might give the firm a new life — it’s been owned by outside parents in the past: Spiegel and General Mills (?!). But bankruptcy court is dicey, especially in this environment. Could we lose another headquarters?

Midweek Briefing: Charticle time — Andrew Sullivan shows what “American socialism” looks like: the percentage of corporate assets nationalized totals 0.2 percent of all corporate America; on The Big Picture, a look at the overleveraged American consumer and its consequences; the New York Times shows the centers of pain from auto industry job losses; the Daily Reckoning has an interesting look at the new rise in food prices.

–Financier George Soros says China’s influence is going to grow faster than expected thanks to the global economic crisis, according to Reuters. “In many ways, Chinese banking has benefited from being isolated from the rest of the world and is in better shape than the international banking system,” he told an audience at a university in Shanghai.

–A sobering assessment of American innovation can be found in BusinessWeek. Aside from the financial swindles, the nation’s historic tendency to create breakthrough products has stumbled over the past decade. It may help explain come of the current unpleasantness.

–Creative class guru Richard Florida looks at where Gen Y is choosing to move, and Seattle is one of the destinations. “Gen Y intuitively understands what economic sociologists have documented: Vibrant social networks are key to landing jobs, moving forward in your career, and one’s broader personal happiness.”

Today’s Econ Haiku:

Let’s hope that Fiat’s

“Fix It Again, Tony” days

Are past. Chrysler does.

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