More big businesses failing. Revised budget forecast for state of California shows even governments are going to have a hard time when the economy is frozen. Maybe it is time to restart the economy.

Even the state government in California may be starting to realize that putting the economy in a deep freezer for an extended and unknown period of time might have some adverse consequences.

Just a few of the business casualties over the last few days:

  • Neiman Marcus (bankruptcy filed)
  • Souplanation/Sweet Tomatoes restaurants (all 97 stores permanently closing)
  • Lord & Taylor (likely BK)
  • J. Crew (bankruptcy filed)
  • J. C. Penney (likely BK)

This discussion will be posted on several of my blogs.

California budget deficit

5/7/20 – ABC news – California doom: Staggering $54 billion budget deficit looms 

Based on an Internet search it looks like just about every news outlet in the country has rewritten the story and published it as their own reporting. I just picked this one to have a specific citation.

Another article I read indicated the forecast back in January was for a $5B surplus in FY 20 which is now a $10B deficit. Projected deficit for FY 21 is $43B.

My attempt to reconstruct the headline number based on fragments of information in the article:

  • $41.2B – drop in revenue over the next 14 months – personal income tax, sales tax, and corporate income tax are expected to drop about 25%
  • $7.1B – increased health and human service program costs
  • $6B – other increased costs, primarily related to coronavirus
  • $54.3B – projected deficit

The income drop is after a $26B handout from Congress. Point estimate on deficit projection with and without federal-aid are:

  • $54B – current projected deficit
  • $26B – federal handout
  • $80B – projected deficit without federal subsidy

To put that in context, proposed budget was $222.2B back in January.

Perhaps, just perhaps, it is time to get the economy working again.

More business casualties

5/7/20 – CNBC – Luxury retailer Neiman Marcus file for bankruptcy as it struggles with debt and coronavirus fallout – Company has $675M of debtor-in-possession funding lined up with $750M of permanent financing arranged. Goal is to wipe out $4B of debt, yes billion.

5/7/20 – People – Souplantation Announces It Is Closing All of Its Restaurants Permanently in the Wake of Coronavirus – The holding company that operates Souplantation (name in So. Cal.) / Sweet Tomatoes (name outside the state) will be permanently shutting down all 97 of its stores.

The branches are losing a million a week. Company says the burn rate would be worse if they adopted carryout service.

I was just a little bit nervous eating at Souplantation in the olden days, you know, way back in 2019 or before. In the age of coronavirus, who would ever again eat at a restaurant where all the food is served buffet style?

Oh, 4,000 people will transition from temporarily furloughed to permanently laid off.

5/5/20 – Reuters – Exclusive:  Lord & Taylor to liquidate its stores as soon as they reopen – sources – Sources say high end retailer will file for bankruptcy soon and does not expect to survive the bankruptcy filing.

5/4/20 – CNN Business – J.Crew has filed for bankruptcy

4/23/20 – Wall Street Journal – J. C. Penney in Advanced Talks for Bankruptcy Financing

Perhaps, just perhaps, it is time to get the economy working again.

Oh, wait.  I already said that. Well get used to it since I’ll be saying it again and again.

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