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Disappearing Brands in 2011

Brands That Could Disappear in 2011

Last April, and again in December, 24/7 Wall St. published their findings of brands that were likely to vanish. Usually, it would take a full year before such a list could be compiled again. However, the current economic climate accelerated the process and a majority of the brands on the first two lists are either gone, have been acquired, or have filed for bankruptcy.

So with a number of the brands on the December list either gone or on a short-term path to extinction, 24/7 Wall St. has put together their latest version of the Ten Brands that Will Disappear. To qualify, they expect each brand to be gone by the end of 2011, or for its parent to be sold or go into Chapter 11.

Which brands could we lose? Read on to see the list.

(AP Photo/Chalres Dharapak)

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Brands That Coul... Last April, and again in December, 24/7 Wall St. published their findings of brands that were likely to vanish. Usually, it would take a full year before such a list could be compiled again. However, the current economic climate accelerated the process and a majority of the brands on the first two lists are either gone, have been acquired, or have filed for bankruptcy.

So with a number of the brands on the December list either gone or on a short-term path to extinction, 24/7 Wall St. has put together their latest version of the Ten Brands that Will Disappear. To qualify, they expect each brand to be gone by the end of 2011, or for its parent to be sold or go into Chapter 11.

Which brands could we lose? Read on to see the list.

(AP Photo/Chalres Dharapak)
Reader's Digest Reader’s Digest was once the most widely read magazine in the world. According to the company, it still may be when its overseas editions are taken into account. Last August, the company took its US operations into Chapter 11 to decrease debt. It emerged from bankruptcy in February with $525 million in exit financing. The company cut the number of issues it publishes a year from twelve to ten last year. It also cut its circulation guarantee for advertisers to 5.5 million copies from 8 million.

It would have been unthinkable just a few years ago that a magazine as old and famous as Reader’s Digest would be shuttered. Iconic titles like House & Garden have been closed, Newsweek is for sale. BusinessWeek might have been closed if Bloomberg had not bought it for next to nothing. The parent of Reader’s Digest has a number of niche magazines, such as Every Day with Rachael Ray and Taste of Home. The company’s book and music businesses reportedly also do well. Reader’s Digest also has 50 editions of its flagship magazine published around the world. But, if the trends in the US publishing industry have show anything, it is that large, widely circulated magazines like Newsweek, US News, and TV Guide have no future in America in their current form. Reader’s Digest may live on outside the US and its parent company may survive. However, Reader’s Digest as it is known in the US will be gone.

(AP Photo/Reader's Digest)
Dollar Thrifty A... Dollar Thrifty Automotive Group (NYSE: DTG), the car rental company, is for sale. Hertz (NYSE: HTZ) is a potential buyer as is Avis Budget (NYSE: CAR). Each of the larger car rental firms would use the Dollar Thrifty business to expand their market share. That does not mean that they would keep the brand. The current company is not much of a business. It made only $27 million last quarter on revenue of $348 million. It has more than $1.5 billion in “debt and other obligations.” The number of vehicles that Dollar Thrifty operates at any one time is only 95,000 compared to 420,000 for Hertz. The firm’s customer base and some of its locations may be valuable, but Dollar Thrifty can’t compete with Avis and Hertz. A decade ago, the car rental industry was able to support six independent brands. A significant drop in business and leisure travel and sharp competition among the companies has already caused the creation of Avis Budget. Dollar Thrifty will be the next casualty of the industry’s consolidation.

(AP Photo/Noah Berger)
T-Mobile T-Mobile, the US wireless provider, is owned by telecom giant Deutsche Telekom. It is the No.4 cellular company in an American market that only supports two really successful firms—AT&T Wireless and Verizon Wireless. Even the third largest company in the market—Sprint—has 50 million customers. T-Mobile had 34 million customers at the end of last year. T-Mobile only had a profit of $306 million in 2009. That was down from $483 million in 2008. T-Mobile not only faces three larger competitors, it also has to begin to offer 4G service to compete with Sprint’s new WiMax service and LTE-based products from AT&T and Verizon. T-Mobile may seek a partner to offer a 4G network, but there are no super-fast broadband networks likely to be finished before its three rivals offer the service. As it now stands, T-Mobile has no future in the US.

A merger with Sprint-Nextel has been mentioned several times. The combined company would have a customer base about the same size as AT&T or Verizon. And the transaction would probably make Deutsche Telekom a large owner of the combined operation. Another alternative would be a merger with Virgin Mobile. Virgin Mobil is smaller than T-Mobile, but the Virgin brand is very highly regarded and already extends across a large number of successful businesses. Virgin Group is involved in 200 businesses around the world. Another potential buyer of T-Mobile’s customer base is Telcel, which has 60 million subscribers in Mexico, is owned by billionaire Carlos Slim, who has already began to expand his business interests of the US. T-Mobile has little brand equity in the US. Maybe Deutsche Telekom will just change the firm’s name.

(AP Photo/Sang Tan)
Moody's Corp. Moody’s Corp. (NYSE: MCO) may have the name with the largest negative brand equity in the US. Scandals about the company’s rating of mortgage-backed securities and allegations that the firm compromised it ratings process to get business have ruined the company’s image. Moody’s is more than 100 years old, but the reputation it built over those years is irretrievably lost. There is a chance Moody’s could be ruined by civil actions, four of which are pending, and by charges brought by the US government. Overseas authorities may bring a number of actions against the company as well. Moody’s activities are almost certainly to be more regulated, which will squeeze margins and hurt sales. Moody’s may end up selling its accounts to a new rating company, which would probably hire many of its employees. Pacific Investment Management Co. and other institutional investors have talked about taking on some if not all the roles that the current rating firms play. Research houses like Alliance Bernstein could also take on some of those rolls. Part of Moody’s operation may stay alive, but there is not much left to salvage in the brand.

(AP Photo/Henny Ray Abrams)
BP p.l.c. The case against the BP p.l.c. (NYSE: BP) brand is not so much that the company will enter bankruptcy. It is that BP may end up breaking into pieces for its own sake. This may be to put the liabilities for the Deepwater Horizon spill into a company that also holds escrow capital to cover the huge costs of clean-up and suits. BP may also want to separate its successful refining operations from its exploration business, or recreate an American- based company similar to BP America, which existed for two decades. A restructuring of BP would also allow the firm to take a badly crippled brand and give the oil operation a new name—much as it did when it changed its name from British Petroleum. The second time may be the charm.

(AP Photo/Simon Dawson)
Radio Shack RadioShack (NYSE: RSH) is one of the oldest retailers in the US. It was founded in 1921 and in the early 1960s was purchased by Tandy Corp. The Tandy name was used for some of Radio Shack’s retail stores. RadioShack is currently a takeover target. There have been rumors that the company may be taken private via a leveraged buyout or purchased by Best Buy, probably for its locations. Best Buy (NYSE: BBY) would certainly not keep the RadioShack brand because it is considered downscale and does not have the reputation for quality products and service that Best Buy enjoys. RadioShack has already began to rebrand itself as “The Shack,” an indication that it knows the older brand is a burden.

(AP Photo/Stephan Savoia)
Zale Corporation Zale Corporation (NYSE: ZLC) was founded in 1924 by the Zale brothers. It was one of the earliest retailers to offer the ability to buy items on credit. By 1980, Zale had revenue of over $1 billion. In 1992, Zale filed for bankruptcy and by the end of that decade, its revenue was $1.3 billion – about the same as it is today. Zale has been at death’s door for some time. Its market value is down to $78 million. The company is trying to turn itself around, but most experts are not convinced. The company recently made the Forbes list for firms with extreme financial risk. In the last quarter, the retailer lost $12 million on revenue of $360 million. Zale is also in a very crowded market that includes retailers as large as Wal-Mart. Golden Gate Capital recently put money into Zale to buy it time. New money may defer the point at which Zale goes under, but it won’t prevent it.

(AP Photo/Matt Slocum)
Merrill Lynch Merrill Lynch may have been acquired, but that will not keep it safe. In fact, quite the opposite is true. Banks and other large financial services firms have a habit of buying large retail brokerage houses and then changing their names. Shearson is gone. So is EF Hutton and Prudential. In most cases the parent company wants to put their own names on the door. That is very likely to happen to Merrill Lynch, which was at one point the largest full-service broker in the US. Merrill is now owned by Bank of America Corporation, and the buyout spawned a number of scandals that kept Merrill’s name in the paper for weeks and did a great deal to harm its name with customers. Bank of America will follow a time honored tradition and Merrill Lynch will become B of A Investment Management.

(AP Photo/Brian McDermott)
Kia Motors Corpo... Kia Motors Corporation is one of the two car brands of Hyundai of South Korea. It has always been a marginal brand. Its stable mate, Hyundai USA, has a reputation for high quality cars like the Sonata and Genesis. Kia sells “low rent” cars and SUV nameplates like the Sorento and Rio. As GM and Ford have already discovered, it is expensive to maintain multiple brands and storied car names, including Pontiac, Saturn, and Mercury, are disappearing. Most Kia cars sell for $14,000 to $25,000. Hyundai has several cars in the same price range (LINK). Hyundai’s Sonata has quickly become one of the best-selling cars in America, and its Genesis flagship model competes with mid-sized BMWs and Mercedes. The parent company will take a page from several other global car companies and dump its weakest brand.

(AP Photo/David Zalubowski)
Blockbuster, Inc... Blockbuster, Inc. (NYSE: BBI) was the national leader in the video rental business for nearly two decades. Now it is contemplating Chapter 11 to eliminate debt. This news pushed the company’s shares as low as $.24. The company lost $65 million last quarter. Its revenue continues to fall rapidly as firms such as Redbox and NetFlix siphon off its revenue. Blockbuster has more than 6,000 stores, so it is hard to imagine that the company could disappear. But, there is some precedent, even if it is on a smaller scale. Blockbuster rival Movie Gallery said in February that it would close all of its 2,400 US stores. Blockbuster’s model of renting movies through physical locations has been destroyed by cable and satellite video on demand, DVDs via mail, and dispensing machines. Blockbuster may still be around as a company that has movie kiosks and a small mail and Internet-delivered content business. But its brick and-mortar business is dead.

(AP Photo/Ron Heflin, file)
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