Home furnishings retailer Linens N Things is on the brink of filing bankruptcy. The New York Times reports that some of their suppliers are tightening contract conditions and stopping shipments. The question to ask is would the suppliers be better off by helping LnT at this crucial time or by choking it further and hastening its bankruptcy.
Gilbert W. Harrison, Financo’s chairman, said that despite its financial problems, Linens ‘n Things has several attractive assets like its real estate.
But suppliers have an incentive to keep Linens ‘n Things afloat, Mr. Harrison said. Without the chain, they will have to deal with only one major customer, Bed, Bath and Beyond.
The questions the suppliers must be grappling with are
- What are the chances a LnT turnaround or a potential buyer rescuing LnT?
- What is underneath the problems?
- What is the expected cost of LnT going down, both from lost account receivables and from future pricing squeeze by Bed Bath and Beyond?
- What is the expected cost of reviving LnT and for how long they have to keep it up?
- Would they be the only vendor stuck with supporting LnT? Would everyone else go with it? What is the critical mass required that improves the changes for turnaround?
- If they are he first, would everyone else follow? Should they wait for someone else to move first? What if everyone waits for the other to move?
“Vendors want to keep this company alive,” Mr. Harrison said. “The last thing they want to see is for it to die.”