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Toys “R” Us Inc. has hired law firm Kirkland & Ellis LLP to help weigh restructuring options ranging from a bankruptcy filing to raising financing as bricks and mortar retail goes through a major downturn, Reuters reported yesterday. The privately held toy retailer had previously said it was working with investment bank Lazard Ltd to help address its approximately $5 billion in debt, of which roughly $400 million comes due next year. Toys “R” Us refinanced some of its debt last year, giving it a few more years to turn its business around before facing billions in debt repayments. In addition to e-commerce, Toys “R” Us has seen steep competition from discounters Wal-Mart Stores Inc. and Target Corp. 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. 

After a 70-year run, the business model driving the U.S. mall industry needs an overhaul, according to a new report, the New York Times reported today. Malls need to shift emphasis away from department stores and toward retailers that are less susceptible to competition from e-commerce, according to a report from real estate services firm CBRE Research. On average, department stores still occupy about 50 percent of the gross leasable area of shopping malls in the U.S., while similarly beleaguered apparel and accessory retailers take an additional 29 percent, said the CBRE report. Retail sectors that are growing, include restaurants, beauty and home furnishings, account for only a small percentage of the typical mall. The traditional mall model, developed seven decades ago, is heavily dependent on categories that are no longer fast-growing or meeting today’s consumer demands, the report said. But while change is necessary, it might be difficult for landlords to make changes quickly given the structure and length of leases, which could span 10 years. “Converting malls’ tenant bases to include more of the categories that in-person shoppers now favor won’t be an easy or quick fix,” said Melina Cordero, CBRE Americas head of retail research. “But it is a necessary evolution for the mall industry to maintain its place as a cornerstone of American retail.”

Vitamin World, a seller of vitamins and nutritional supplements, plans to file for chapter 11 protection, hoping to end costly lease agreements for some of its stores, the company’s chief executive officer said yesterday, Reuters reported. Long Island, New York-based Vitamin World plans to file bankruptcy in order to exit real estate leases that were negotiated by its previous owners, the said CEO Michael Madden. The vitamin seller, which has about 345 stores, plans to file bankruptcy as soon as this month. “This action will empower us to move forward as a stronger organization that can and will continue to service our millions of loyal customers with premium offerings via retail and online channels,” Madden said. Private equity firm Centre Lane Partners acquired Vitamin World from global vitamin maker NBTY Inc last year for about $25 million. NBTY sold the business because it had shifted to investing in its core brands, such as Nature’s Bounty and Sundown Naturals, found in major retailers across the U.S.

U.S. department store chain Bon-Ton Stores Inc. is hiring advisers to help it turn around its business and slash its debtload, as it struggles to cope with the sector’s downturn, Reuters reported yesterday. Bon-Ton has tapped advisory firm AlixPartners LLP to provide operational advice on its turnaround efforts, and is also interviewing banks to appoint an advisor to review strategic options including debt restructuring. Bon-Ton serves smaller communities in 26 states across the U.S. Northeast, Midwest and Great Plains under banners including Bon-Ton, Younkers and Bergner’s. The York, Pa.-based company has been suffering from years of losses, including a loss of $33.2 million for the quarter that ended July 29. Bon-Ton’s debt totaled about $850 million as of July 29. A portion of the company’s revolving credit facility expires next year. Bon-Ton’s market capitalization is just $15 million. 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. 

Raleigh, N.C.-based food distributor El Ideal Foods — which specializes in Hispanic and other international food products — has filed for chapter 11 protection, the Triangle Business Journal reported yesterday. El Ideal Foods cited assets of about $470,000 and liabilities of roughly $965,000 in its filing. It remains open for business. El Ideal Foods stated gross revenue of about $1.8 million since the beginning of 2017 in its filing. In 2016 and 2015, gross revenue was approximately $3.1 million each.

U.S. department store operator Sears Holdings Corp. is having trouble stocking shelves, as some vendors have fled while others are demanding stricter payment terms because of difficulties hedging against default risk, Reuters reported on Friday. The strain in Sears’ supply chain is exacerbated by the scarcity and high cost of a type of vendor insurance known as accounts receivable puts, which ensure a supplier will be paid even if the retailer files for bankruptcy, according to interviews with Sears’ vendors and insurance brokers. “It’s too expensive,” Michael Fellner, owner of Montreal-based women’s wear company Lori Michaels Apparel & Manufacturing Inc, said of the specialized vendor insurance. He said he stopped shipping to Sears in March, when his insurer stopped providing coverage. Two other small vendors told Reuters they stopped supplying Sears this year because they could not afford the insurance, whose cost spiked after Sears warned in March of “substantial doubt” over its ability to continue as a going concern. They asked not to be identified discussing confidential commercial arrangements.

Perfumania Holdings Inc., a U.S. retailer with exclusive distribution rights to several Trump-branded colognes, said yesterday that it had initiated a recapitalization and was filing voluntary petitions for chapter 11 protection, Reuters reported. The company said in a statement that it planned to reduce its retail store count, increase investments in its e-commerce business and become a privately held company. The company also said that it would “continue to operate in the normal course of business.” Perfumania’s wholesale businesses, Parlux, holds the exclusive distribution rights to U.S. President Donald Trump’s fragrances Empire and Success, as well as daughter Ivanka Trump’s fragrance. The company’s portfolio also includes fragrances from celebrities such as Rihanna, Jessica Simpson and Jay Z. Perfumania said its Parlux and Five Star Fragrance subsidiaries were not included in the chapter 11 filings. 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. 

Sears Holdings Corp.’s brick-and-mortar stores continued to lose ground in a tough retail environment, despite the company’s cost-cutting efforts, the Wall Street Journal reported today. Sales at stores open at least a year declined 11.5 percent in the fiscal second quarter as the company scaled back the number of pharmacies and electronic products in its stores. Kmart’s same-store sales fell 9.4 percent, compared with 3.3 percent over the same period and Sears same-store sales declined 12.3 percent compared with a 7 percent drop last year. The declines come as the company has closed about 180 underperforming stores so far this year. Sears says that it is on track to close 150 more stores by the end of the third quarter and announced the closure of an additional 28 Kmart stores. Read more. (Subscription required.) 

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

Joe's Crab Shack, the chain of beach-themed seafood restaurants, has closed at least 40 locations as the company undergoes a bankruptcy and sale, UPI reported yesterday. Seven of the closings are in Texas, the state where the company's owner is based in Houston. The companion brand, Brick House Tavern + Tap, closed two locations. The company's website now lists 72 Joe's Crab Shacks and 23 Brick Houses.