This site is prone to publish bankruptcy news, as any kind of corporate bankruptcy filing is likely to lead to store closings.
However, a chapter 11 bankruptcy is actually a financial tool to help save a company, in a more macroeconomic sense. Stores may close, jobs may be lost, but if a thousand-store business can emerge with 700 locations and a viable business, that’s far more preferable to the company simply closing its doors for good.
The back half of Rob Walker’s Marker piece on the Pier 1 bankruptcy explains this nicely, and is worth reading. (Side note: Rob Walker and Marker are both highly recommended parallel reading to After Shopping.) In short, chapter 11 means a company “seeks a court-supervised process giving it some form of relief — a way to start over.” For its part, Pier 1 filed for bankruptcy in January, ahead of the pandemic, a process that was undone when stores had to close this spring.
We will see more bankruptcies and liquidations in the coming months, but not all of them will be worst-case scenarios; like you, this author is hoping for triumphs and clever new ways of doing business as we move forward.
Brooks Brothers’s bankruptcy filing (see previous post) is the latest and largest apparel company impacted this the summer. But several other brands have encountered headwinds, some with more drastic outcomes.
Last week, Lucky Brand Dungarees filed for chapter 11 bankruptcy protection, citing the coronavirus’s impact on sales. Lucky announced at least 13 store closings, and has lined up a stalking horse bid to sell its physical assets as well as the brand rights.
Fellow denim label G-Star RAW also filed for bankruptcy, but with more optimistic plans. The company noted its relatively low debt and sees an opportunity to rethink its retail approach.
More radically, Need Supply and sister label Totokaelo are shutting down entirely. End dates have not been announced, and the company is choosing to close rather than going bankrupt, but the stores will be gone soon.
Also, the G.H. Bass and Wilsons Leather stores are going out of business. Parent company G-III, streamlining its portfolio in the wake of the coronavirus crisis, announced the permanent closure of both brands with liquidation sales to start shortly.
Many other brands have announced store closings of various scale, from Zara (which will close up to 1200 locations worldwide) to Victoria’s Secret (250 store closings this summer and fall, a result of parent company L Brands failing to sell the marque) to Signet Jewelers (as many as 300 store closings this year). Additional stores are covered in the link above.
Legendary retailer Brooks Brothers, which dates to 1818 and has dressed all but four U.S. Presidents, filed for bankruptcy protection today. The company is battling both covid-related declines in shopping and a shift to more casual attire that is accelerating as workers head to the office less.
Brooks Brothers’ filing is notable as it is one of the few large retailers with significant manufacturing in the United States. Last month, the company announced layoffs and posted for-sale signs at its three domestic factories, a response to slower sales during the pandemic.
According to the Wall Street Journal, Brooks Brothers plans to use the bankrupty process to find a buyer. A sale would continue the company’s interesting time capsule of apparel industry consolidation and trends. Its rich domestic history notwithstanding, Brooks Brothers hasn’t been an American-owned company since 1988, when the holding company Allied Stores sold the brand to British retailer Marks & Spencer. For the past 19 years the Brooks Brothers Group has been owned by Claudio del Vecchio, part of the family behind global eyewear powerhouse Luxottica.
Restaurant operator NPC International, which has been in business since 1962, announced a bankruptcy filing yesterday. The company operates more than 1500 Pizza Hut and Wendy’s locations.
NPC did not announce any store closings, and the filing is meant to address its $900 million–plus debt load. Financial explorations predate the pandemic.
Children’s restaurant and entertainment chain Chuck E. Cheese filed for bankruptcy this week, citing the damage wrought by extended store closings. One wonders if the protocols that will be in place for the foreseeable future–crowd limits, hand sanitizing–could preclude the chain from ever reopening successfully.
Struggling vitamin and nutrition retailer GNC announced a chapter 11 bankruptcy filing, with plans to close nearly 1200 of its 5800 retail locations. The company cited covid-19–related store closings as a main driver of the filing.
GNC did secure $130 million in financing to endure the pandemic and successfully emerge from the bankruptcy process.
AMC Theatres may not be able to survive the coronavirus shutdowns, the company revealed in its latest regulatory filing.
The company, the world’s largest movie theater chain, told the Securities and Exchange Commission that it had “substantial doubt” it could withstand the reopening process, despite securing credit lines and restructuring debt to help it endure the current landscape.
AMC acknowledged as causes the uncertainty around the timing of reopenings, the altered capacity quotas many locations will face, and the reconfigured calendar for new releases. With 40% of ticket sales typically going to customers over the age of 50, who may be slow to return to a crowded movie theater, the company needs to work toward an operating model that can keep its doors open.
CNN summarized May’s bankruptcy filings by retailers and other consumer industry operators, including a few covered in this space as well as some new notes. Among them:
- Department store chains JC Penney and Neiman Marcus
- Discount home goods retailer Tuesday Morning
- and Gold’s Gym, which vows, “We are absolutely not going anywhere.”
As noted in the article, “A bankruptcy filing doesn’t necessarily mean a company will go out of business. Many use bankruptcy to shed debt and other liabilities while closing unprofitable operations, in hopes of emerging leaner and stronger. … Still, many other brands that have filed for bankruptcy with the intention of staying in business didn’t survive.”
One Axios commentator thinks the corporate bankruptcy wave has just gotten started, noting that many of the ones to date had pre-existing financial stressors prior to the lockdown period. More filings are likely to follow as the full impact of the virus on retail sales becomes more clear.
Hertz Global Holdings, the parent company of the Hertz, Thrifty and Dollar rental car agencies, filed for bankruptcy protection Friday. The firm has suffered from the lack of travel during the covid-19 pandemic, making it impossible to service $19 billion of debt, much of it securitized (which means Hertz could be forced to sell off its assets to repay creditors).
Since the beginning of the crisis, the company had named a new CEO and laid off 10,000 workers as it grappled with its finances.
J.C. Penney, one of the longstanding American department store chains, has announced plans to close more than 240 of its 846 stores as part of its bankruptcy restructuring.
Penney, which filed for Chapter 11 bankruptcy protection on May 15, has been struggling to attract customers for years, with a stock price below $1 for much of 2020.