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‘A New Extreme’ for the Sharing Economy: Shoe Rentals

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Discount shoe purveyor DSW says it wants to give its customers what they want, which is how the chain has arrived at this: shoe rentals, the Washington Post reported Thursday. The retailer announced last week that it is considering adding a rental service, as well as shoe repair and storage facilities, to some of its 511 shoe-and-accessories stores. The experiments are part of a broader effort by DSW, which stands for Designer Shoe Warehouse, to get more customers into its stores. “Today’s customer craves more than just a transaction, they want an experience,” said Michele Love, the company’s chief operating officer. Retailers across the country are racing to add services that might keep customers coming back to their physical locations, where people are more likely to make impulse purchases — and spend more — than online. Nordstrom this week opened its first merchandise-free store, staffed with stylists, tailors, manicurists and bartenders. Apple, meanwhile, is outfitting its stores with outdoor plazas and indoor boardrooms in hopes that shoppers will linger. At DSW, executives say the idea is to create a one-stop shop where customers can buy everyday footwear, stash items that are out of season — and yes, rent shoes.
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Nordstrom Family Scrambles to Save Buyout Plans

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The Nordstrom family is scrambling to salvage its plan to take the high-end retailer private after running into trouble raising financing for a leveraged buyout that could be worth $10 billion, the Wall Street Journal reported Friday. The founding family, whose members still run Nordstrom Inc., and private-equity firm Leonard Green & Partners are considering a new structure for the buyout that would include less debt. The family is trying to come up with more equity, but it is unclear where it might come from, and adding equity would dilute the family’s ownership stake. Under the original terms, the Nordstrom family was to contribute its 31% stake in the company, which was valued at $2.5 billion as recently as Aug. 1. Leonard Green was to contribute $1 billion in equity, leaving the banks to sell about $6.5 billion in debt. The banks are concerned they won’t be able to sell the debt before the holiday shopping season, an important bellwether for retailers, and would have to hold it until next year, exposing them to the risk that Nordstrom’s business, or the broader market, deteriorates, the people said. If a deal is going to be struck this year, it likely has to happen in the next two weeks.
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Store Officials: Despite Bankruptcy, Toys ‘R’ Us Stores to Remain Open

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Even though it recently filed for bankruptcy, national toy store Toys ‘R’ Us plans to not only remain open, but to institute new improvement measures at its stores, The Daily Nonpareil reported yesterday. The chain has 1,600 Toys ‘R’ Us and Babies ‘R’ Us stores. The company has also started some new measures for more convenient shopping, including the opening of new playrooms where children can try out games as a way for parents to gauge their popularity with their children, while toy demonstrators are nearby to answer questions and introduce similar toys. “Our store is open and continuing to provide customers with great service and a curated assortment of merchandise in the toy and baby categories,” a corporate statement said. “We have a number of exciting initiatives underway, including improvements to our stores and loyalty programs, and we are leveraging technology to bring our physical stores to life. Our team members look forward to seeing customers in our stores and putting huge smiles on children’s’ faces.”
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Bankrupt U.S. Retailers Begin to Catch a Break

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Bankrupt U.S. Retailers Begin to Catch a Break
An unexpected helping hand from creditors, landlords and vendors is allowing more U.S. retailers to stay in business following bankruptcy with most of their stores and employees in the fold, Reuters reported Friday. The new approach marks a turning point for the beleaguered sector, which has seen at least 19 brick-and-mortar retail chains shut down the bulk of their operations since 2014. Until this year, most bankrupt retailers, including American Apparel, Sports Authority and The Limited, were dismantled during their bankruptcy process. However, several creditors, landlords and vendors now see more value left in some retailers, and are seizing on an opportunity to minimize their own losses in the retail rout. This could spell a slowdown in the decline in brick-and-mortar retail jobs, which fell by more than 100,000 this year, as more than 6,000 stores shuttered under increasing pressure from competition among traditional retailers as well as e-commerce firms such as Amazon.com Inc. “We’re seeing a set of situations come together in which the constituencies have more interest in the retailer surviving than not,” said Holly Etlin, a managing director at AlixPartners LLP, a consulting firm that worked on the bankruptcy of Gymboree. Most of these retailers were owned by private equity firms, which saddled them with debt in a risky bid to juice returns. But in bankruptcy talks, the chains are arguing successfully that they can generate enough cash to withstand the sector’s woes if their debt mountains are slashed and payment obligations eased. Creditors, landlords and vendors are more receptive to this approach, because their own financial projections show that liquidations would result in a limited recovery of what they are owed.
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Creditors Set Oct. 7 Deadline for Sears Canada to Enter Liquidation

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Creditors to Sears Canada have set a deadline of Oct. 7 for the retail chain to enter liquidation agreements for all its assets, leaving the company with just days to reach a deal to continue operations, Reuters reported. That tight deadline presents a challenge and could potentially derail negotiations with the executive chairman Brandon Stranzl, who stepped away from day-to-day operations of Sears Canada to come up with a proposal to keep the 65-year-old company running. Stranzl submitted a revised proposal, lawyers for Stranzl said. Stranzl’s bid presents “significant closing risk and uncertain recovery,” FTI consulting the court-appointed monitor said in a report on its website this week. Sears Canada has steadily lost market and struggled to remain relevant to shoppers who have switched to stores that keep up with fast-changing fashion trends. Sears Canada’s sales have fallen every quarter since it was spun off from Sears Holdings in 2012. Sears must agree to liquidate all its assets by Oct. 7 to receive payments from its creditors to ease a growing liquidity crunch, according to the latest amendment to an agreement between the company and its creditors.

Nordstrom Drops on Report Its Buyout Deal Is Losing Support

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Nordstrom Inc. shares fell the most in almost five months amid growing concerns about a deal to take the upscale department-store chain private, Bloomberg News reported yesterday. The Nordstrom family has struggled to amass the financing needed for the buyout. The Nordstrom family first announced it was considering a buyout in June. With the overall department-store industry slumping, a deal would give them a chance to work on a turnaround plan outside of public scrutiny. Private equity firm Leonard Green & Partners has held discussions about supplying about $1 billion in financing, but the total deal could require as much as $10 billion. Read more

What does the future hold for retail bankruptcies? Be sure to attend ABI’s Bankruptcy 2017: Views from the Bench on October 17. 

Toys ‘R’ Us Unveils Augmented Reality Plans Following Bankruptcy

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Two weeks after filing for bankruptcy protection, Toys ‘R’ Us is debuting an augmented reality (AR) experience that it hopes will help reinvigorate its stores and make them destinations for shoppers who might otherwise choose to shop online, USA Today reported today. The AR activities — which plant computer generated images on top of a real world environment — tap into the interest sparked by the Pokemon Go craze last year. They will go live at 23 Toys ‘R’ Us stores today and then nationwide on Oct. 21. While the AR experience was being developed months before the company filed for chapter 11 protection to deal with $5 billion in long-term debt, efforts to make the retailer's roughly 1,600 stores more interactive will be key to the company's turnaround, says CEO Dave Brandon.

Reis: U.S. Retail Mall Vacancies Up 8.3 Percent in 3Q 2017

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Real estate research firm Reis Inc. said yesterday that U.S. retail mall vacancies rose to 8.3 percent in the third quarter, compared with the preceding quarter, due to confirmed closings of J.C. Penney and Sears Holdings Corp. stores, Reuters reported. Construction activity fell 49.2 percent in the quarter, with 1.63 million square feet of new construction completed, the lowest level of completions since 2014, according to the report. The trend would likely continue as more stores announced bankruptcy or closures, including Toys ‘R’ Us, The Gap, Teavana and True Religion Jeans, the firm said. So far, 10 retailers have filed for bankruptcy in 2017, higher than last year, with the number set to eclipse 20 bankruptcies filed during the 2008 financial crisis, according to AlixPartners, which advises distressed firms. Asking rent inched up 0.4 percent, while effective rent rose 0.5 percent, Reis said. Read more

What does the future hold for retail bankruptcies? Be sure to attend ABI’s Bankruptcy 2017: Views from the Bench on October 17. 

Toys ‘R’ Us to Receive a Cheaper Rate on Bankruptcy Loan

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Toys “R” Us Inc. is close to getting a cheaper rate on an operating loan that could help with the retail chain’s efforts reorganize in bankruptcy, Bloomberg News reported yesterday. While the company has a total of $3.1 billion in bankruptcy financing, including a $1.85 billion asset-backed revolver, the improved rate comes on a $450 million term loan. Initial talk for the loan, which is syndicated and fully funded, was a price of Libor plus 750 basis points, or 7.5 percentage points; now a rate of Libor plus 675 basis points is being discussed. The terms will potentially save the company around $4.4 million in interest over the lifetime of the loan, according to data compiled by Bloomberg. The terms also improved on the original-issue discount, giving Toys "R" Us 99.5 percent of the loan’s funds, rather than 99 percent. JPMorgan Chase & Co. is the lead agent on the 16-month loan, and Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc. and Barclays Plc are joint arrangers and book runners, according to court papers. Read more

What does the future hold for retail bankruptcies? Be sure to attend ABI’s Bankruptcy 2017: Views from the Bench on October 17.