Chain names and Web sites often live on after bankruptcy

Circuit City. Linens'N Things. Bombay Co. They're all out of business, their stores shuttered, many employees laid off.

But according to their old Web sites, they're all still selling, or planning to sell, the same stuff they always did -- everything from digital picture frames to leopard-print rugs.

How can this be? Didn't these companies shut down?

Typically, when a company goes out of business by way of bankruptcy, other companies buy its assets -- everything from cash registers and furniture to unsold merchandise.

Also for sale are assets like the company's name, logo and Web site -- some experts say a name still has value even if the company has gone belly up.

That's why a store chain's Web site can live on -- and can even look largely unchanged -- after the company has gone under.

Here are some questions and answers about these phantom retailers.

Q:What are the old sites of out-of-business chains doing?

A: Henrico County-based Circuit City, which closed down the last of its 567 stores in March, is one of the most prominent names that has gone under.

Online retailer Systemax Inc. bought the Circuit City brand and Web site in May. Systemax sells the same types of products that Circuit City did, such as flat-panel televisions, computers and the Nintendo Wii, and says on its site that it offers a wider selection than Circuit City had in its stores or online.

The Linens'N Things brand also is still selling. The home-goods retailer went out of business this past winter, and in February a company called LNT Acquisition LLC bought the Web site LNT.com and the Linens 'N Things brand name. The company sells items once found in the chain's stores, such as dishes and bedding, and has since added more premium brands.

Gadget retailer The Sharper Image, which filed for bankruptcy protection in February 2008 and has closed all of its stores, lives on as a brand, not a retailer. Visitors to SharperImage.com are pointed to retailers such as OfficeMax, Bed Bath & Beyond and Macy's, where Sharper Image products -- massage chairs and weather clocks, for instance -- are sold.

But this isn't the old Sharper Image company. The remaining assets -- including the name and online business -- are owned by a joint venture formed between Hilco Consumer Capital, Gordon Brothers and Bluestar Alliance. The brand name is licensed to manufacturers and distributors.

Q:So the company dies, but the name survives. How does this happen?

A: Companies buy up the names in bankruptcy, often for very little money.

In the case of Circuit City, Systemax bought the fallen company's trademarks, domain names, customer lists and other information related to the online business for $14 million in cash plus a share of future revenue over 30 months.

Companies in bankruptcy protection want to come up with as much money as they can, so they'll take whatever they can get for their assets.

Q:But if a company has gone bankrupt, aren't consumers leery of its brand name?

A: Even if a company suffered through the slumping sales and other woes that led to a bankruptcy, experts say some consumers will still have a connection to its brands and could decide to make a purchase again.

Q:Can consumers trust these new phantom retailers?

A: They need to do research and look at policies for returns and warranties, since they may not be the same as under the old ownership, said Edgar Dworsky, a consumer advocate and founder of ConsumerWorld.org.

Companies aren't required to say on these sites how the ownership has changed, though he said they sometimes do in fine print, like a link on Circuit City's main page saying it is under new ownership.

The bottom line? Don't assume it's business as usual.

"It's very easy for consumers to be misled," he said. "They may have a very positive image of a famous brand that they've known for years, and all of a sudden somebody else is really behind that brand, with or without the same quality and policies." -- The Associated Press