The economy's down, but their business is looking up

When Ben Wysor recently calculated sales for his used-book store for the first quarter, he came up with a satisfying figure: The total was up 18 percent from this time last year, compared with 10 percent gains in previous years.

“Maybe this bad economy is helping,” said Wysor, who, with his wife, Jane, owns The Recycled Reader in Elizabeth City, N.C. “So many people do say when they get a stack of books from us and it costs them $20 – that would be one book at Barnes & Noble. They’re pleased at how much they can get for their buck.”

Most local used-book stores are reporting gains, thanks to cost-conscious bibliophiles.

The Book Rack, with three stores in Virginia Beach, has avera ged $18,000 a month in sales this year, owner Ethel Barritt said. Two of her stores are outpacing results from 2007, she said.

Collectively, the three stores have about 90,000 titles, primarily paperbacks, including classics, children’s books and best-sellers. Most sell for half-price. Bring a book to trade in, and the discount usually grows to 75 percent.

So a customer who drops off a book can get a James Patterson thriller that usually costs $7.99 for $2, Barritt said.

“More and more people are thinking about gas and food and everything else,” she said. “But people who love to read aren’t going to give up books.”

Not every used-book seller is reaping gains. “I keep getting a premonition that I will see the effect of it (the economy) eventually, but up until this point it’s not noticeable,” sai d Tommy Warren, owner of Beacon Books in Norfolk.

Yet two used-book stores in the Wards Corner section of the city – Bargain Books of Virginia and The Book Exchange – are doing better this year.

John Knight, owner of The Book Exchange, estimates a 20 percent jump in business. “We try to continuously make the store better and turn the inventory over a lot,” he said. The economy “has had a neutral effect. We might get more of some people and less of some other people.”

Lynn Howard bought Bargain Books in November 2006 . “My business increased,” she said, “but I think it was more because I was getting more new books in. We’re finding more and more new customers.”

The market has been less generous to traditional booksellers.

Borders, its stock tumbling, recently said it might consider a takeover. Bar nes & Noble last month reported a $2.2 million loss for the first quarter of its fiscal year.

“The economy is impacting retail traffic,” said Joseph Lombardi, chief financial officer for Barnes & Noble. “Customers are making less frequent trips.” He said the used-book market is growing, but it’s not taking a substantial cut from the company ’s business.

Sarah Pishko, owner of Prince Books in downtown Norfolk, experienced a dropoff in business earlier this year. She attributed that mostly to utility work outside her Main Street store. After work was done, she said, sales bounced back.

“Generally, my customers are not going to stop buying a book,” Pishko said.

Nathan’s Lynnhaven Pawn Shop in Virginia Beach also carries golf clubs and game systems, laptops and guitars. And loads of jewelry.

Segal, who’s been in the pawn business for 34 years, last month took out a drawer filled with wedding bands, bracelets, crosses and chains, all delivered within a two-week period. The modern-day gold rush.

He fingered a ring inscribed: “With All My Love. Always, Jeff.” “Jeff,” Segal said, “ma y have found someone else.”

Business is up 15 to 20 percent these days, Segal said. More folks struggling to pay mortgages. More hoping to cash in on the rising value of gold.

Pawnshops typically buy and sell goods and lend money using items, sometimes keepsakes, as collateral.

“All pawnshops have picked up as far as getting business; you see more people coming in and getting loans,” said Tina Pardue, co-owner of Kempsville Pawn, also in Virginia Beach. “People are coming in with broken gold more than ever.”

Of the gold that comes in to Nathan’s, half gets sold in the store, Segal said. Another quarter gets melted down and sold to refineries. An on-site jeweler refinishes and repolishes the remai ning quarter to sell to retail stores.

Donald Hornstein , owner and president of Littman’s Pawn Shop in Norfolk, said the unsettled economy has brought “a greater variety of classes” to his store.

“There were always people that needed to break up a household or move or retire or downsize,” Hornstein said. “But I’m seeing more people that just want to convert things to cash. These are clearly people who never had to sell anything before.”

They’re not necessarily looking for big sums. “They don’t need to borrow $300 to $5 00,” he said. “They nee d to borrow $30 or $40.”

Alan Dail, owner of Liberty Pawn in Virginia Beach, said one reason stands out. “Every third person that comes in the door says they’re coming to borrow money for gas,” Dail said.

That wasn’t why James Patterson, a 35 -year-old Lowe’s employee, visited Nathan’s a few months ago .

Patterson brought in his grandfather’s Mossberg .308 rifle for a loan of “a couple hundred dollars” to help pay his electric bills. He lives with his wife, a full-time student at Tidewater Community College, and their 3-year-old son in an apartment near Lynnhaven Mall.

He came by two weeks ago to deliver his monthly $12.50 interest payment.

The rifle, which he’s used for target shooting, “is about the only thing of value I have,” Patterson said. “It’s a real big blow to the ego. I don’t frequently do this, but it’s one of the things I had to do at the time.”

Patterson said he hoped to pay back the loan in a few weeks t o retrieve the rifle.

Segal said loans rang e from $5 to $50,000. Interest is capped at 10 percent monthly. These days, though, “more are selling items instead of borrowing money and paying it back,” Segal said.

That’s where the cracks threaten to erase the gains for pawnshops.

“The problem is, you have to be able to sell it to someone,” Dail said. “When t he economy is better, it’s easier to find people to buy things.”

For Tom Dickenson, a bankruptcy attorney in Norfolk, a recent appointment revealed a jolting sign of the times.

His visitor was a medical assistant in a doctor’s office. “She’d been living in her car for a year,” Dickenson said. “She had lost her house in a foreclosure.”

“That one,” he said, “threw me for a loop.”

The experience underscores a new trend in bankruptcy cases. “I have been seeing more of what we would think of as affluent clients,” Dickenson said. They have included university instructors, health professionals such as emergency medical technicians and nurses, and even agents for collection agencies.

It also illustrates the most prevalent factor pushing people to bankruptcy these days.

“They’re just in over their heads in terms of their mortgage payments – that seems to be the underlying theme that we’ re seeing,” said Jeffrey Flax, a partner with the Virginia Beach fi rm of Childress, Flax & Levine .

“It’s not necessarily that they’re behind on their mortgage,” said Dickenson, a lawyer for 22 years. “A lot of them tried to stay current on their mortgage at the expense of falling behind on other stuff, like credit card payments.”

For the first four months of the year, the number of individuals in Hampto n Roads who filed for Chapter 13 bankruptcy – typically a restructuring of debt to protect a h ome or other major asset – rose 60 percent from the same period a year ago. A total of 726 peopl e filed for bankruptcy, up from 453, according to data from the U.S. Bankruptcy Court’s Eastern District of Virginia.

The number that filed to wipe out their debts through Chapter 7 rose 34 percent to 1,203 from 897 for the January-through-April period of 2007.

That upswing has led to at least a 25 percent increase in clients for Jim Pedigo, a partner with Harbour Law PLC in Norfolk. Flax’s firm recently added an associate to keep pace with the surge in business; Harry Jernigan’s fi rm in Virginia Beach has grown f rom seven to 10 attorneys in the past six months.

Dickenson described the increase in his client base as small, but he expects “to get slammed” as the year goes on.

“I’m not glad that I’m seeing more clients,” Pedigo said. “But I am glad that this type of relief is available for those people who need it now.”

Jernigan said he’s seeing more people with midlevel incomes who have “stable employment.” Before, “it tended more to be people who lost their jobs or had some major illness or some kind of catastrophe.”

One of the few positive developments Jernigan has found: “People don’t seem to be waiting to the last minute to deal with it and explore the alternatives. A lot of times in the past, it’s been when they’re almost against the wall.”

That early planning, he said, helps some individuals find alternatives to filing for bankruptcy. In most of those instances, Jernigan said, the firm chalks it up as a free consultation.

Dickenson said he’s had clients “that have abused the system and run up credit card debts and lived high on the hog. … Bu t the majority are the working underemployed , the people who are earning $12 an hour.”

For every client he’s lost in the past few months, cert ified financial planner Reginald Corinaldi figures he’s gained five.

“Any time there’s any kind of trouble or uncertainty with the economy, people tend to get dissatisfied with their current plans or look for new advisers,” he said. “It’s actually a net positive for us.”

He likened the mood of investors to hurricane preparedness. No worries in calm times. But “when you know a storm is coming, you’re going to check your batteries and see if you have enough water,” said Corinaldi, a co-owner of Financial Security Cos. in Virginia Beach.

His new clients, he said, are about evenly split between those leaving another adviser and those hiring one for the first time.

Despite the perpetual domino effect in their client base, financial advisers such as Jim O’Brien, with Edward Jones in Nor folk, and William Sheavly, managing principal of Sheavly Financial Group in Virginia Beach, report a steady increase in customers.

“There were times, like the late ’90s, when everybody was an expert, and they didn’t need professional advice,” O’Brien said. “And then they find out they aren’t an expert. They make mistakes and they seek out professional advice.

“They feel more vulnerable,” he said. “That’s what you’re seeing to some extent now.”

Jim Flinchum, managing principal at Bay Capital Advisors LLC in Virginia Beach, predicted an upsurge in clients will come later in the year, “when we hit the apparent bottom of the recession.”

“We won’t have to chase them; they’ll have to chase us,” Flinchum said. “Right now, they’re terribly terrified. They’re frozen. They’re waiting to see how bad it’ll be and how they can be spared this terror in the future.”

Flinchum said most of his longtime clients are not besieging him with calls. The ones with the jitters are the “newly affluent.”

“If a person is newly wealthy and has never been through a recession,” he said, “this is a terrifying experience for them. We do a lot of hand-holding for those people.”

Expectations are mostly diminished on both sides of the table during a downturn, planners say. “For a financial adviser,” Sheavly said, “it’s as much if not more important not to lose the client’s money as it is to make money.”

Clients, Corinaldi said, “are most demanding when the market is good. 'This fund went up 30 percent. How come mine only went up 20 percent?’ ”

Staff writer Tom Shean contributed to this report.

Philip Walzer, (757) 222-3864, phil.walzer@pilotonline.com