Coldwater Creek Bankruptcy Is Not a Canary in the Coal Mine

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After failing to find a buyer, struggling women’s clothing retailer Coldwater Creek Inc. (NASDAQ: 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. (NYSE: CHS), Christopher & Banks Corp. (NYSE: CBK), and Ann Inc. (NYSE: 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.

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.

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.

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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