Bebe Stores Inc. has done what few other retailers have been able to do recently — close all of its stores without seeking bankruptcy protection, the Wall Street Journal reported today. The mall-based retailer, which announced in April it would be closing all of its roughly 180 locations, was able to cut deals with its many landlords outside of a bankruptcy filing. Bebe’s brand name and website will live on through a joint venture agreement with Bluestar Alliance LLC, which it had signed last year. The company said in an earlier Securities and Exchange Commission filing that it intends to transfer its domain name, social media accounts and international wholesale agreements to Bluestar Alliance.
After six straight years of plunging sales and financial losses, the Sears is shuttering stores and selling off crown jewels, such as its Craftsman tools line, according to a commentary in Friday’s Washington Post. Decades of missed opportunities have brought Sears to this, according to the commentary. It lost its focus with ventures into Discover credit cards and Coldwell Banker real estate in an attempt to diversify. Then big boxes such as Home Depot and Best Buy chipped away at lucrative product niches. But maybe the biggest whiff: Executives knew as far back as the early 1990s that they had to wean Sears off its dependency on shopping malls — but its many forays into other store formats never quite worked. As e-commerce moves toward its golden age, Sears is an also-ran, according to the commentary.
Children’s clothing retailer Gymboree is expected to file for bankruptcy in the coming weeks or even days, after it elected not to make an interest payment on $171 million of bonds that was due on Thursday, MarketWatch.com reported on Saturday. The troubled company, which has been in talks with investment banks and advisers on ways to repair its balance sheet since January, has a three-day grace period before it is officially in default. But it’s expected to announce some kind of prearranged or pre-packaged filing in the near term that will allow it to proceed in an orderly fashion, said Reshmi Basu, associate editor of restructuring at Debtwire. Like rivals, Gymboree has been suffering from the many factors currently clobbering the retail sector, from weak mall traffic trends to changing consumer behavior to the onslaught from Amazon.com Inc. The rise of e-commerce is forcing many to invest heavily in their own online and delivery technology, at a time when sales are under pressure. Gymboree is expected to keep its Janie & Jack line, which is still successful, but to ditch its Crazy 8 brand, which is flailing, said Basu. The company is in talks to retain Great American Group and Tiger Group, two companies that specialize in asset appraisals, liquidations and inventory auctions, she said.
After closing another 1,000 stores since Memorial Day weekend, there are now just 72 company-owned RadioShack stores left, Fortune reported yesterday. The chain electronics store had a liquidation sale over the weekend and will also leave 500 dealer-owned stores open. RadioShack filed for bankruptcy in March and initially suggested closing only 200 stores while evaluating the remaining 1,300. "The company and its advisors are currently exploring all available strategic alternatives to maximize value for creditors, including the possibility of keeping stores open on an ongoing basis," RadioShack said previously. Company stores now exist in just seven states with locations concentrated in New York, Pennsylvania and RadioShack's native Texas.
Payless ShoeSource could nearly double the number of store closures under its bankruptcy plan as the extent of the discount footwear chain's troubles come into sharper focus, USA Today reported today. The company, which filed for chapter 11 protection in April, is asking a federal bankruptcy judge for permission to close up to 408 additional stores. Those closings add to about 400 locations the Topeka, Kan.-based retailer already put on the chopping block when it tumbled into bankruptcy. Taken together, the 800-some locations would represent about 20 percent of Payless' total locations worldwide.
Bain Capital in 2010 outbid others including Apollo Global Management LLC to acquire the company for the hefty sum of $1.7 billion. Seven years later, on the eve of a bankruptcy filing that could come from Gymboree as soon as June, Bain executives seem reluctant to give up on their big bet, Bloomberg News reported yesterday. They’ve snatched up Gymboree bonds as a way to retain a strong position in any revival. And just last week the company named a new chief executive officer with deep retail experience, who is charged with formulating a turnaround strategy. Read more.
In a related commentary yesterday on RetailDive.com, Gymboree is nearing a deadline on its $1 billion debt load, which could lead to a death spiral if it can't score a lifeline fast, according to a commentary yesterday on RetailDive.com. In many ways, Gymboree’s woes reflect those of the broader market: declining mall traffic, shifts in consumer spending away from material goods and toward services and experiences, e-commerce’s rapid absorption of market share, and growing competition from fast fashion, off-price and everyone else. Now add a massive pile of debt to the equation: Gymboree's more than $1 billion of debt — much of it stemming from private equity group Bain Capital’s leveraged buyout of the retailers in 2010 — has turned a sales drought into an existential crisis. With a multimillion dollar payment due June 1 and many hundreds of millions in principal due next year, the company has few options left but to restructure its debt and operations — if its creditors agree to a deal. Read more.
Discount retailer Payless ShoeSource is investigating whether its leveraged buyout by private equity firms and the dividend payments they received led to its bankruptcy, according to court papers, Reuters reported yesterday. The company disclosed its investigation on Wednesday in a filing aimed at persuading Bankruptcy Judge Kathy Surratt-States in St. Louis to reject a request by an official committee of creditors to hire an expert to review pre-bankruptcy transactions. Creditors have said in court filings that San Francisco private equity funds Golden Gate Capital and Blum Capital, which together hold 98.5 percent of the company and control its board, received more than $350 million in dividends in recent years. Payless, which has 4,000 stores around the world, said in court papers that a separate investigation could hinder its goal to recapitalize and emerge from bankruptcy in August.
Sears Holdings Corp. gained some breathing room in its comeback effort thanks to deals with some of the biggest names in finance, Bloomberg News reported yesterday. Lenders including billionaire Bill Gates’s Cascade Investment LLC agreed to give the struggling retailer more time to repay debt. And MetLife Inc. will take on pension obligations for about 51,000 retirees, Sears said yesterday. Under one deal announced Tuesday, Sears wins more time to repay most of a $500 million secured loan facility that was to be due in two months. The company will repay just $100 million in July and extend the remainder of the loan until January, with an option to push out the maturity another six months. The lenders include Cascade and JPP, an entity tied to Lampert, who has thrown the company lifelines before. Sears also said it will pass off $515 million in pension obligations to MetLife. That transaction will reduce volatility and expenses, helping the retailer reach its target to cut debt and pension obligations by $1.5 billion this fiscal year.
The idea of spending a leisurely few hours of the weekend at the mall — browsing aisles for a new pair of jeans and shoes and hitting the food court — is going out of style, the Pittsburgh Post-Gazette reported today. The latest in a growing list of retail casualties, mall staple and teen apparel company rue21 Inc. filed for chapter 11 reorganization last week, joining the ranks of Payless, American Apparel, Aeropostale, hhgregg, and The Limited. This year, retail bankruptcies have set a record pace. According to S&P Global Market Intelligence, the number of bankruptcies in early 2017 had already come close to the total in 2016. Between January and April, 14 retailers have filed, compared to 18 in all of last year. (The report was released before rue21 filed on May 15.) The primary factors putting the squeeze on retailers are known: More shopping is shifting online, and consumer tastes are changing, with shoppers opting for gadgets or experiences over the trendiest jacket. The result is that there are too many stores and too little customer traffic to keep them going. Companies are trying to figure out the best way for them to adapt to a changing retail environment. Many are shrinking their store footprint, cutting costs and shifting their focus to e-commerce, but they are approaching those goals from different angles. Noting that each struggling company has its own story, “It is widely agreed that the U.S. is over-stored and that the solution for flat or declining in-store sales resides to a significant degree online, where the most sales growth is now taking place,” according to a recent report from S&P Global Market Intelligence.
