Americans bought more cars, restaurant meals and building supplies in July, a rise in spending that points to steady economic growth anchored by an improving job market, the Associated Press reported yesterday. Retail sales climbed 0.6 percent last month after a flat reading in June, the Commerce Department said Thursday. Purchases at auto dealers rose 1.4 percent in July, while restaurants and building materials stores both recorded a 0.7 percent gain. Shopping also improved at furniture stores, sporting goods retailers and clothiers.
American Apparel Inc. warned on Tuesday that it had about $13 million of available cash and risked default if it didn’t raise money or refinance its debt, the Wall Street Journal reported yesterday. The retailer, which also said that it would miss a regulatory deadline to file its June quarter financial results, toughened its language from a month earlier, when it disclosed it was running short of cash to meet its obligations over the next 12 months and said it intended to close several stores as part of an aggressive cost-cutting plan. American Apparel has staved off bankruptcy through cash infusions. It last amended its $50-million line of credit with Capital One in March, according to regulatory filings.
A&P has asked a bankruptcy court judge to set aside two key union provisions — bumping rights and full severance pay — after reaching a negotiation impasse with labor groups, USA Today reported today. The supermarket wants to completely eliminate bumping rights, saying that the administrative burden and costs associated with allowing workers to do that are too high and undesirable to would-be buyers of its stores. Bumping rights allow employees who work the longest for the company and at a store slated to close to take the job of a less senior worker at a supermarket that will continue to operate. The other sticking point is the amount of severance pay A&P will pay and when, the documents filed late Tuesday indicate. The supermarket has proposed paying employees who will lose their jobs as part of the bankruptcy 25 percent of the severance they are entitled to on a "timely basis" with a maximum cap of $10 million for all workers. The rest of the severance would be paid later, depending on how much remains after the stores have been sold and what other A&P creditors are due as part of settling the bankruptcy case.
Silicon Valley-based automaker Tesla Motors is losing more than $4,000 on every Model S electric sedan it sells, using its reckoning of operating losses, and it burned $359 million in cash last quarter in a bull market for luxury vehicles, Reuters reported today. Tesla's shares fell almost 9 percent on Thursday and slipped another 2 percent on Friday as investors and analysts weighed the risks of Musk's ambitious plans for expanding Tesla's auto and energy storage businesses. Tesla had just $1.15 billion on hand as of June 30, down from $2.67 billion a year earlier. Automakers consume cash to pay for assembly line equipment, including metal dies and plastic molds, as well as testing to meet safety and emissions standards. A typical new car can cost $1 billion or more to engineer and bring to market. Compared to other automakers, Tesla's narrower margin for error is just one more way in which it is different from its century-old rivals. The company said it plans $1.5 billion in capital spending this year, mainly to launch its Model X, a battery-powered sport utility vehicle with eye-catching, vertical-opening "falcon wing" doors. Tesla reported $831 million in capital spending during the first half of the year, indicating it will spend roughly another $700 million.
Dozens of landlords, union members and others are concerned they are getting short shrift in A&P's plans to sell off all of its stores and assets, The Journal News reported on Saturday. Lawyers for the supermarket chain are due in district court today where they are expected to address dozens of issues raised in its bankruptcy case, including whether the company is overly compensating some creditors, should encourage potential buyers of its stores to take over the company's pension plans and should give landlords more time to evaluate the finances of their would-be new tenants. Meanwhile, more than 40 A&P workers have flooded Hon. Robert D. Drain with letters about how A&P's bankruptcy has affected them and why the court should not agree to set aside A&P's union contracts if labor negotiations break down.
Great Atlantic & Pacific Tea Co. is facing opposition to its plan to quickly sell or close nearly half of its stores in bankruptcy court, including from landlords and the Pension Benefit Guaranty Corp., The Wall Street Journal reported yesterday. In a Wednesday bankruptcy court filing, PBGC said that the grocery chain should change its auction procedures to “encourage assumption” of pension liabilities by a proposed buyer. Pensions for 25,815 A&P workers under multi-employer plans are currently underfunded by $302.5 million. A&P is seeking to auction 120 of its 296 supermarkets and is looking to close another 25. A hearing on the matter has been set for Monday.
Creditors who stand to lose the most are voting overwhelmingly in favor of a bankruptcy sale that would keep the nation's largest chain of Christian book and gift stores operating, MLive reported yesterday. Voting by creditors on Family Christian Stores' chapter 11 sale is scheduled to conclude today and if creditors vote in favor of the plan, Family Christian's lawyers will ask Hon. John T. Gregg to approve it at a hearing on Tuesday. The plan before creditors would sell the company to Family Christian Acquisitions, a related entity that has offered to pay between $52.4 million and $55.7 million for the company's assets and inventory without assuming its debt. With 266 stores in 36 states, the Grand Rapids, Mich.-based chain filed for chapter 11 protection from creditors in February. With 3,100 full-time and part-time employees, the company claimed assets and inventory of nearly $75 million and debts of more than $127 million.
Great Atlantic & Pacific Tea Co. has tapped Gordon Brothers Retail Partners LLC as its liquidation consultant for the grocer’s going-out-of-business sales, which received preliminary approval to go forward earlier this week, the Wall Street Journal reported today. In a Wednesday filing with U.S. Bankruptcy Court in White Plains, N.Y., A&P said it tapped Gordon Brothers to conduct the final sales of groceries, as well as the fixtures, furniture and supplies, at the 25 stores it plans to initially close. The agreement also covers additional stores A&P decides to close. A&P will pay Gordon Brothers a small fee if the grocery sales equal more than A&P initially paid for the products sold. For the fixtures and furniture, Gordon Brothers will get 10 percent of all gross sales. In the filing, A&P estimated expenses related to the sales at the first 25 closing stores at $800,000.
Insurance companies are cutting back on their coverage of Toys “R” Us Inc. suppliers, bringing another headache to a retailer that has suffered more than two years of losses, Bloomberg News reported yesterday. Coface SA and Euler Hermes Group, which sell credit insurance to vendors, are removing Toys “R” Us from some policies and declining to renew coverage in other cases. The carriers may still negotiate with some vendors to keep providing some protection. Losing coverage could raise concerns for toy suppliers as they weigh the risks of shipping to the retail chain, which scrapped plans for an initial public offering in 2013.
Z’Tejas Southwestern Grill has filed for bankruptcy protection, the Austin (Texas) American-Statesman reported on Saturday. Z’Tejas has a total of nine restaurants, including five locations in Arizona and one in Costa Mesa, Calif., according to the company’s website. After reviewing the “historical performance of the company,” as well as “current and long-term liabilities,” “it is desirable and in the best interests of the company, its creditors, employees, stockholder, and other interested parties that” the bankruptcy petition be filed, according to court documents.
