%1

Dean & DeLuca, the high-end grocery chain appears to be in financial trouble, according to a Washington Post analysis. In 2018, it backed out of three leases in Manhattan and pulled the plug on a second Washington, D.C.-area store. It abruptly closed all four of its Charlotte locations in April 2018, and shortly after that its Maryland and Wichita locations. The Upper East Side location on Madison Avenue in New York ceased operation this June 30 and the St. Helena, Calif., store was shuttered on July 4, both considered flagship stores. This could signal hard times for other fabled ultra-premium grocers: Other similar super-premium grocery brands such as Balducci’s have closed underperforming stores. The proliferation of specialty grocery stores has been fierce, confounding predictions that grocery sales would pivot to online sales. Amazon has bet big. Whole Foods and Trader Joe’s have been joined by Germany-based discount chain Aldi, “healthy food” chains like Asheville, N.C.-based Earth Fare, swiftly expanding Sprouts Farmers Market and more upscale Lucky’s out of Colorado.

Restaurants Unlimited Inc., an eatery chain owned by private-equity firm Sun Capital Partners Inc., filed for bankruptcy protection, blaming state-mandated wage hikes and changing customer habits for its financial problems, WSJ Pro Bankruptcy reported. The Seattle-based company, which owns and operates 35 full-service restaurants in six states under brands that include Kincaid’s, Palomino and Henry’s Tavern, said it plans to put itself up for sale as part of the proceedings in U.S. Bankruptcy Court in Wilmington, Del. The company owes about $39 million to secured lenders that have refrained from taking action on the defaulted obligations since last year. It also owes $7.6 million to unsecured trade creditors that include seafood, produce and meat suppliers as well as Major League Baseball’s Seattle Mariners. A number of landlords are also listed as unsecured creditors.

Cosmetics maker Coty Inc. is taking a $3 billion write-down on CoverGirl, Max Factor and other brands it acquired a few years ago, becoming the latest consumer giant to reckon with mainstream labels that are losing their grip on American shoppers, the Wall Street Journal reported. The makeup and fragrance seller, which is controlled by European investment firm JAB Ltd., has struggled with weak sales and executive turnover. On Monday, the company said that it will restructure its operations and cut jobs to ease indigestion from brands Coty bought in 2016 from Procter & Gamble Co. Many women have shifted to higher-end and niche brands, and increasingly buy beauty products from online startups or outlets like Sephora and Ulta Beauty. Fighting back, CVS and Walgreens have looked to expand their selection while paring mass-market beauty names. The shift has meant sales declines for many once-popular brands, including Revlon Inc.’s namesake line and L’Oréal SA’s Maybelline.

Subway is the largest fast-food company in the world by store count, with more than 24,000 restaurants in the U.S. alone, the New York Times reported. Unlike at chains such as McDonald’s and Burger King, where many franchises are operated by investment firms, Subway owners are mostly individuals and families. The company’s co-founder, Fred DeLuca, made stores easy to open; most new franchisees are charged a $15,000 initial fee, compared to $45,000 at McDonald’s. In exchange, Subway operators must hand over more revenue than at many other chains — 8 percent of gross sales — while also agreeing to other fees and stipulations. By the time DeLuca died in 2015, though, the company was struggling. Rivals like Jimmy John’s and Quiznos had grown, and Subway’s spokesman, Jared Fogle, pleaded guilty to child sex and pornography charges. Mr. DeLuca’s sister, Suzanne Greco, took over as chief executive, inheriting a company that many felt had grown too fast and haphazardly. In 2016, for the first time ever, more Subway stores closed than opened. But while many franchisees shut down because of underperformance, others operating profitable locations began to feel targeted, too. For many owners, Subway’s internal workings are a mystery. The chain, which is private, offers far less financial information than other global fast-food peers. In the most recent version of a disclosure document given to prospective franchisees, which is more than 600 pages long, the company notes that it can revise its rules “at any time during the term of your Franchise Agreement under any condition and to any extent.”

A group of Toys “R” Us workers who lost their jobs as the company went bankrupt will get some of the estate’s remaining cash to make up for severance pay that they were denied during the court case, according to representatives for the group, Bloomberg News reported. Bankruptcy Judge Keith L. Philips awarded $2 million to the workers, who were promised severance at the outset of the bankruptcy as part of a benefits plan that was later canceled as the restructuring unraveled. The retailer’s bankruptcy is in its final stages, and the focus is on distributing cash that was set aside for administrative claims. Those expenses typically include fees for advisers, lawyers and other parties that assist in winding down a company and they’re given high priority by the court for repayment in full. Former workers led by Ann Marie Reinhart Smith, a 30-year Toys “R” Us employee, filed a class action claim in 2018 to the bankruptcy court to ask that their severance claims get the same priority as administrative claims, seeking a bigger sum than the court ultimately approved.

A small faction of officials at Forever 21 Inc. has asked its biggest landlords if they’d consider taking a stake in the clothing retailer, as the company’s leadership battles internally about how to turn around the struggling store chain, Bloomberg News reported. The group, which didn’t have the backing of the company’s co-founder, talked to Simon Property Group Inc. and Brookfield Property Partners LP about a range of options including a sale. A rival set of officials, aligned with co-founder Do Won Chang, has opposed any such deal with landlords as Chang wants to preserve control over the empire that made him a billionaire. A representative for Forever 21 said that the company hasn’t had talks with landlords outside of rent negotiations. 

Arcadia Group Ltd., the London-based operator of Topshop and Topman stores, will complete liquidation sales in the U.S. this Saturday and plans to vacate all its U.S. stores the following day, WSJ Pro Bankruptcy reported. A lawyer for the group yesterday gave Judge James Garrity Jr. of the U.S. Bankruptcy Court in New York an update on the going-out-of-business sales, which are proceeding amid a dispute between Arcadia and its U.S. landlords. The landlords have asked for the bankruptcy court’s help investigating whether Arcadia removed assets from the U.S. before filing for bankruptcy and whether it continues to possess valuable assets within the U.S. The landlords, which include those currently leasing Arcadia’s flagship U.S. stores in Manhattan, have alleged they are being stonewalled, both in the U.S. and abroad. “They will not tell us how much is there and how much is being generated,” Michael Keats, a lawyer for the landlords, told the judge Wednesday. Arcadia said that it has engaged in discussion with landlords about exchanging information and that all relevant documents already have been produced or made public. A lawyer for the group told Judge Garrity Wednesday that it will continue conversations with the landlords, and that another meeting between Arcadia and the landlords is set for July 8. Read more. 

Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store. 

Pier 1 Imports sales continued to slide as the Fort Worth, Texas-based home furnishings retailer struggles to reorganize its business, the Dallas Morning News reported. The company said yesterday that it will close 57 stores this year, up from its previous estimate of 45 stores. Total sales fell 15.5 percent in the quarter to $314.3 million vs. $371.9 million a year ago. Same-store sales, or sales from stores open throughout the preceding 12 months, fell 13.5 percent. Pier 1, operator of 970 stores in the U.S. and Canada, reported a first-quarter loss of $81.7 million, compared with a loss of $28.5 million a year ago. The results come a week after the company completed a 1-for-20 reverse stock split to avoid its shares being delisted from the New York Stock Exchange.