Linens ‘n Things files Chapter 11

NEW YORK – A Chapter 11 bankruptcy filing by Linens ‘n Things is the latest sign that the retail sector is becoming leaner and meaner amid a difficult consumer environment.

On Friday, the bedding- and home-furnishing retailer filed a petition in bankruptcy court in Delaware and said it would close 120 underperforming stores.

Linens ‘n Things operates about 589 retail stores in 47 states, including two in the Spokane area. There was no word from the company on which stores would be affected except that almost a quarter of closures would be in California.

Ken Perkins, president of research company RetailMetrics LLC, said the bankruptcy stems from operating issues and the lagging economy. Retailers Sharper Image Corp. and Lillian Vernon Corp. have sought bankruptcy protection, and Home Depot announced Thursday it will close 15 stores.

“There is going to be a record number of store closings through bankruptcy in the next 150 to 1,500 days, as the retail recession becomes the worst the U.S. has seen in 30 years,” said Burt P. Flickinger III, managing director of the consumer industry consulting firm Strategic Resource Group.

The Clifton, N.J.-based company said economic factors such as the decline in the housing market, tightening credit markets and a downturn in consumer discretionary spending led to a “precipitous decline” in profitability and liquidity.

The factors worsened in the first quarter of 2008, the company said.

The filing is expected to be a boon to rival home-furnishings retailer Bed, Bath & Beyond Inc., which has one Spokane store.

In a note to investors Friday, Deutsche Bank analyst Mike Baker said half of Bed, Bath & Beyond stores overlap with a Linens ‘n Things store within three miles. He estimated the bankruptcy could conceivably add as much as 18 cents a share to Bed, Bath’s annual earnings.