WhenHub - Companies That Have Gone Bankrupt - 2017

Companies That Have Gone Bankrupt - 2017

It’s no secret the retail industry is undergoing a transformational period that has many scaling back physical operations, shuttering stores, reorganizing mounting debt loads and in some cases ending up in bankruptcy court. Distressed bond issuers in the U.S. retail and apparel markets are nearing recession levels, tripling in the past six years, according to a report released by Moody’s Investors Service. The report found 13.5% of Moody’s retail and apparel portfolio is distressed, compared to 16% during the Great Recession. Debt maturities are also headed toward record levels over the next five years and retailers are filing for bankruptcy at a record rate.

Toys R Us

2017-09-18
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The latest retailer to file for voluntary chapter 11 bankruptcy protection. the iconic toy retailer did so seeking to relieve itself of debt. Toys R Us has $4.9 billion in debt, $400 million of which has interest payments due in 2018 and $1.7 billion of which is due in 2019. The company has said it will continue to operate as usual its approximately 1,600 Toy R Us and Babies R Us stores globally, ahead of the key holiday shopping season.


Many saw the company's mounting debt — a legacy of its acquisition by Kohlbergon Kravis Roberts, Bain Capital Partners and Vornado Realty Trust — as unsustainable, especially in a quickly evolving retail world and toy market. Toys R Us has been trying to compete against mass merchants, who have put pricing pressure on the box retailer, and online players. The company just this summer revamped its website, and it has been struggling for years with declining store sales.


In a court document, CEO David Brandon said the company's debt service payments have been gobbling up around $400 million in cash every year, making it impossible to keep up with modern competition in the toy retail market. If Toys R Us can emerge from bankruptcy with less debt and money to reinvest in its business, the process could mark a turning point.

Aerosoles

2017-09-15
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The footwear maker filed for bankruptcy, saying it plans to close most of its stores and focus on its wholesale, e-commerce and international businesses. Aerosoles, formally known as Aero, blamed its bankruptcy on declining mall traffic, big industry wide markdowns, and a shift toward online shopping, according to a court filing.


The retailer has said it expects to complete Chapter 11 restructuring, which could include a sale to a third party, within roughly four months.


Aerosoles has been trying to find a sweet spot between its reputation for comfort and its appeal as a retailer of affordable footwear to include more fashion-forward options and higher prices. Denise Incandela, who has held executive roles at Saks Fifth Avenue and Ralph Lauren, replaced CEO R. Shawn Neville in April, and said that the Chapter 11 filing will enable the company to improve its financial structure and right-size its retail footprint, in order to refocus its turnaround strategy.


Investment firm Palladin Retail Partners added Aerosoles to its stable of retail and apparel companies in 2014: The footwear company has had three chief executives since. With 120 retail locations, the brand had a performance vibe early on. The idea was to be able to walk from home to the subway and work without resorting to wearing one's sneakers, but the brand's appeal has faltered of late, and the tough apparel market has taken its toll.

Vitamin World

2017-09-12
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Vitamin World filed for chapter 11 bankruptcy protection with plans to close at least 50 stores as part of its restructuring. The retailer has roughly 330 stores. Vitamin World blamed its bankruptcy on "significant supply chain and ingredient availability disruptions" along with "above-market rents and underperforming retail stores," according to court papers.


Vitamin World has closed 45 underperforming stores since early 2016, when it tapped RCS Real Estate Advisers to review its "above market rents." That saved the company $2 million in profit, according to court documents. But it wasn’t enough to stave off bankruptcy and, as the retailer’s CEO previously told media, not all landlords would play ball as Vitamin World tried to negotiate rents and leases.


Vitamin World Chief Financial Officer Frank Conley said in a court filing that the retailer also suffered "significant supply chain and ingredient availability issues" that hurt sales and crimped liquidity during the transition away from its previous owner, NBTY Inc., a supplement manufacturer. The company owes a total of $14.4 million in accrued interest on secured debt and another $9.5 million on a seller note originating from the company’s 2016 buyout by a private equity company. The retailer’s inventory is valued at around $30 million.



In a message posted to Facebook, Vitamin World reassured customers that it’s not going out of business and will continue to serve customers for years to come.

Perfumania

2017-08-26
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Perfumania has been “working diligently to amend its business model, reduce its cost structure, improve supply chain efficiency, optimize marketing, reduce expenses and improve operating results long-term,” according to CEO Michael Katz. In the first quarter of this year, the company closed 43 stores, and its bankruptcy filing is meant to accelerate those efforts, Katz said. It plans to close 64 of its 226 stores. The retailer’s total debt, according to its bankruptcy filings, sits at $253.9 million. Meanwhile, sales have been declining — in fiscal 2016, they fell by 13.5% to $468.9 million compared to the prior-year period. Losses, too, have been widening, from 75 cents a share in 2015 to $1.53 a share last year. In its most recently reported quarter, Perfumania saw its amount of cash and cash equivalents fall by 76%.


In Ch. 11, the company hopes to not just reduce its expenses but transform into more of a digital retailer, with an emphasis on its e-commerce business and omnichannel initiatives that will enhance and create a more seamless shopping experience.







Alfred Angelo

2017-07-14
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Alfred Angelo Piccione and Edythe Piccione founded the bridal business in Philadelphia in the 1930s and it was later run by their children and based out of Delray Beach, FL. The company recently held 61 stores nationwide, as well as stores in Japan, Spain, the Netherlands, France, the U.K., Canada and Australia. Many of its designs, which included “special occasion” dresses for bridesmaids and others, were sold by more than 1,400 retailers globally.

On June 29, Alfred Angelo’s headquarters faced an eviction lawsuit over unpaid rent, according to the South Florida Business Journal, and on July 14 the company posted a notice on its website acknowledging it had filed for Chapter 7 bankruptcy, which entails a full liquidation of its assets. Sudden store closures created chaos for patrons who had already ordered gowns and showed up at the shops to find them closed. “As a result, all stores and wholesalers are closed,” according to the company.

True Religion Apparel Inc.

2017-07-05
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Southern California retailer True Religion, founded in 2002, once held a respectable reputation for quality, designer denim. But as the athleisure trend took hold and consumer tastes shifted toward yoga pants over the last several years, the jeans maker struggled to retain its once popular business. By 2016, the company became burdened by some $500 million in debt and hired law firm Kirkland & Ellis LLP to explore restructuring options, according to Business of Fashion.

Efforts to rejuvenate the business, however, have been fruitless. In February, Moody’s Investors Service pegged the brand as one at risk of filing for bankruptcy protection due to factors like stressed liquidity, weak quantitative credit profiles, challenged competitive positions, sponsor ownership and erratic management structure. The retailer ultimately filed for bankruptcy protection on July 5, signing a restructuring agreement with lenders to erase $350 million in debt, while keeping stores open and growing its digital business, True Religion CEO John Ermatinger, said in a statement.


True Religion said in a court filing that it's aiming to stay in business, but is also is planning to shutter an undisclosed number of stores. It has roughly 140 stores and has sold its products in various department stores across the United States.


Papaya Clothing

2017-06-15
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Papaya Clothing was in part a victim of its own success. After opening in 1999, the teen apparel retailer opened some 50 of the 80 stores it now operates during the past six years. From the chief financial officer’s account, Papaya was successful. It brings in about $134 million in sales, boasts a rapid product development timeline and consistently leads its category in sales per square foot of space. But it ran into the broader retail slowdown and faced heady competition from e-commerce, fast fashion off-price retailers. It filed for bankruptcy in June as it faced liquidity issues, in part due to the costs and debt from its rapid expansion.


Like Gymboree and rue 21, Papaya hopes to remain in operation. Papaya has asked the court for the ability to exit some 30 leases. The retailer also asked for leeway to honor potentially hundreds of thousands of dollars in outstanding customer discounts, returns and loyalty rewards as it looks to restructure its debt and stay up to date on utility payments and other obligations.

Gymboree

2017-06-11
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Children’s retailer Gymboree filed for Chapter 11 in June, after missing an interest payment on outstanding bonds and ahead of the maturity of loans worth hundreds of millions of dollars. The debt was a legacy of private equity firm Bain Capital’s leveraged buyout of the company in 2010. Adding to the company’s financial woes were suppliers —jittery about the company’s finances and news of then-CEO Mark Breitbard’s departure — demanding stricter payment and shipment terms.


Gymboree’s sales had sagged amid declining mall traffic and competition from off-pricers, Target, e-commerce sellers and retailers in its own niche, namely The Children’s Place and Carter’s. ames Mesterharm, Gymboree's chief restructuring officer, said in a court filing that the retailer was hurt by lower-cost competition from rivals Children's Place and Gap, both of which have less debt financing. Despite these headwinds and financial woes, Gymboree’s creditors see value in the company as a retailer. They’ve agreed to reduce the company’s debt load by $900 million and inject debtor-in-possession capital so Gymboree can keep operating. But the company will certainly shrink, with plans to shut as many as 375 stores in bankruptcy. Meanwhile, the company’s competitors are poised to snatch up any forgone sales as Gymboree closes stores. The main beneficiary is likely to be The Children’s Place, which overlaps broadly with Gymboree stores. Gymboree hopes to emerge from bankruptcy in a matter of months.

Rue21

2017-05-15
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In April, teen apparel retailer Rue21 began shuttering some 400 stores nationwide, about a third of its fleet, calling it a “difficult but necessary decision.” That left the retailer with about 800 stores and an e-commerce business. But downsizing wasn’t enough. Ultimately, the company filed for Chapter 11 bankruptcy protection on May 15, entering into agreements with some lenders to reduce debt and provide additional capital in support of its restructuring efforts, with an aim to keep the company alive. The retail chain, which operates more than 1,100 stores, listed its assets and liabilities in the range of $1 billion and $10 billion, according to a court filing.


Rue21 has been in the midst of a turnaround since an executive suite shake-up last October by private equity owner Apax Partners shortly after credit ratings firm Fitch Ratings warned Rue21 could slip down the slope to bankruptcy. The company replaced General Merchandise Manager Kim Reynolds as well as CEO Bob Fisch, who together had run the company for some 15 years. The retailer’s situation mirrors the challenges that have plagued many mall-based junior apparel retailers — over expansion, declining mall traffic and a lack of turnaround support from private equity ownership.


A message on rue21.com read, “It’s true – we are closing some stores. It was a difficult but necessary decision. But the good news is we still have hundreds of locations across the country, and our website rue21.com, open for business!”

Rue21 said it expects to continue normal business operations during the Chapter 11 reorganization process.


Payless ShoeSource

2017-04-04
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Discount shoe retailer Payless filed for Chapter 11 April 4 that CEO W. Paul Jones called it a “difficult, but necessary, decision” prompted by a challenging retail environment, which he said will only intensify. The company immediately announced plans to close 400 stores as part of an effort to “work to aggressively manage the remaining real estate lease portfolio.” The store closure target doubled more than a month later, with 800 of the 4,400 stores Payless operated as of April. At the time of bankruptcy, Payless also agreed with a majority group of its term loan holders to reduce its debt load by almost 50% as well as its lower annual cash interest costs.


Payless, founded in 1956 in Topeka, Kansas, reinvented shoe retail by introducing a no-frills, self-service approach that let it sell at lower prices. But the concept is no longer new and exciting to consumers, as the old-fashioned shoe salesperson is now relegated to department stores (and even Macy's is phasing those out) and some specialty stores. Payless is also yet another victim of a leveraged buyout, after it was acquired in 2012 by private equity firms Blum Capital and Golden Gate.


Gander Mountain

2017-03-20
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Gander Mountain filed for Chapter 11 bankruptcy protection on March 10 with immediate plans to close 30 stores and offer itself up on the auction block. The outdoor and sporting goods chain, like others that have fallen into bankruptcy this year, had gone through a rapid expansion in the years befor the retail slowdown. Since 2012 the company opened or announced some 60 new stores, and at one point operated 162 locations in 27 states. That was on top of its direct-to-consumer catalog internet business and the Overton’s e-commerce retail unit from Greenville, North Carolina. But the company, like Sports Authority and Eastern Outfitters before it, ran headlong into widening competition in its sector that includes the likes of Dick’s and Cabela’s.


On May 1, Camping World Holdings, an Illinois-based network of RV-centric retail locations and outdoor-related services, announced it hadwon the bankruptcy auction for Gander Mountain and Overton. The sale topped $37 million and included a host of assets, among them real estate leases, intellectual property rights, operating systems and platforms, distribution center equipment, e-commerce businesses, and fixtures and equipment. Shortly after the court approved the sale, Camping World announced it would keep open 70 of Gander Mountain’s 126 then-remaining stores.

Gordmans

2017-03-13
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Founded just over 100 years ago and once known as Richman Gordmans, Omaha, Nebraska-based Gordmans Stores was once a fixture in the Midwest. But the discount department store did not adapt well to changing consumer demand for e-commerce, only launching a website in 2015. Gordmans was purchased by private equity firm Sun Capital in 2008 and expanded its store fleet rapidly, mirroring the expansion of department stores like J.C. Penney and Macy’s at the time.


In recent years, Gordman’s has been plagued by declining foot traffic and plummeting sales. Sales fell 75% in the past year alone, and in January, the company announced an unspecified number of job cuts amid “the current sluggish retail environment.” In March, the company ran 106 stores in 62 markets and 22 states and carried a debt load of about $85 million. That month, speculation of an imminent bankruptcy caught wind, and the retailer eventually filed for Chapter 11 bankruptcy protection mid-March, also announcing a slew of job cuts. Just weeks later, ex-Gordmans CEO (and the founder’s great-grandson) Jeff Gordman challenged regional department store chain Stage Stores in a bid to regain control of his family company. Ultimately, Stage Stores won the rights to Gordmans intellectual property, about 50 store leases, a distribution center and inventory for an undisclosed amount.

RadioShack

2017-03-08
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On March 8 RadioShack filed for Chapter 11, again, after having emerged from bankruptcy two years ago as a private company through a sale to hedge fund Standard General.


With the March filing came plans to close 200 stores and to evaluate its options for the remaining 1,300. CEO Dene Rogers blamed poor performance of mobility sales for thwarting further progress for the retailer. RadioShack also failed to find any way to dent the increasing dominance of Amazon, which accounted for a whopping 90% of the $5.6 billion growth in U.S. consumer electronics in 2015, according to Deutsche Bank. At the time of the March bankruptcy announcement, RadioShack was reported to be in talks with Sprint, which helps run about a third of its brick-and-mortar operations in co-branded stores, to evaluate its options for stores.


After 96 years in business, consumer electronics retailer RadioShack will have just 70 corporate and 500 dealer stores nationwide — down from 7,300 at its peak.


Over the Memorial Day holiday, RadioShack closed more than 1,000 stores across the country.

“At the end of this month, RadioShack will be closing its doors at all but 70 retail store locations as we migrate to RadioShack.com and we cannot thank you, the RadioShack family, enough for sharing in the journey throughout the years,” the company said in a news release.

The retailer is held a memorabilia online auction through July 3, according to RadioShack.com.


Hhgregg

2017-03-06
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The electronics, home furnishings and appliance retailer, founded in Indiana in 1955, became a multi-regional chain in the late 20th century. As competition heated up in the space, from Amazon as well as Best Buy, Sears and J.C. Penney, CEO Robert Riesbeck took measures in 2016 to shake up the company’s senior management, expand its free delivery options, boost digital efforts and streamline the supply chain. On March 3 2017, the retailer announced a 40% reduction in its store fleet, some 88 underperforming stores and three distribution centers, resulting in 1,500 job cuts. News of the turnaround came amid reports of an imminent bankruptcy filing, which was ultimately filed three days later only days after the company announced the closing of nearly 90 stores. At the time, Hhgregg said it had lined up an anonymous buyer (which appeared to be the retailer’s ad agency Zimmerman Advertising). But by the end of March, the company acknowledged the deal had collapsed. A month later, the retailer threw in the towel, receiving court approval for a plan to close its remaining 220 stores and liquidate its assets.


The news comes after hhgregg failed to find a buyer by its April 7 deadline.



Vanity

2017-03-01
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Grand Forks, North Dakota-based Vanity was founded as a private company in the 1950s selling apparel and accessories for young women. By 2013, its store fleet had grown to 170 stores in 26 states. But the good times wouldn’t last.

By March 2017, the mall-based specialty apparel retailer succumbed to declining foot traffic and changing consumer demands, and began advertising a “going out of business” sale. That month it filed to reorganize under bankruptcy protection with a plan to shutter all of its stores. While a restructure is still pending, its e-commerce website is currently disabled although it promises shoppers, “We’ll be back soon!” Whether it will, remains to be seen.



BCBG Max Azria

2017-03-01
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BCBG Max Azria Group had been floundering for years leading up toits bankruptcy filing on March 1. The brand portfolio struggled to win a following and maintain sales while the company struggled under a debt load that by 2013 had risen to $685 million. Longtime investor Guggenheim Partners was responsible for $475 million of that. In 2015, BCBG received $135 million from investors to help restructure that debt, but problems persisted. In January 2017, the company hired business management consultant AlixPartners to tackle the challenge. By the beginning of New York Fashion Week in February 2017, BCBG, a 20-year veteran of the show, was making headlines for bankruptcy buzz rather than its clothing.


On June 9 BCBG announced that two companies in a stalking horse bid — Marquee Brands and Global Brands Group Holding Ltd. — would buy for an undisclosed amount most of its assets in bankruptcy. Per the plan, Marquee would acquire the intellectual property of the flagship BCBG brand, and Global Brands would acquire assets associated with the operation of the BCBG business. Many saw the outcome as the most hopeful in the rash of recent retail bankruptcies, with the long-respected BCBG Max Azria brand kept alive by its buyers.

Eastern Outfitters

2017-02-06
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Eastern Mountain Sports, founded in 1967 in Massachusetts by two climbers, and Connecticut-based discount retailer Bob’s Stores were once popular sellers of outdoor apparel and gear in the Northeast. While the companies enjoyed a steady period of growth and profitability, financial stability did not last.


In 2016, Eastern Outfitters' previous owner, Vestis Retail Group, shuttered regional sports retailer Sport Chalet in order to focus on the Bob’s and Eastern Mountain Sports operations. It ultimately sold those retailers to Versa Capital Management, which restructured the companies under the parent company Easter Outfitters LLC at the time.


Fierce competition in the sporting goods space and private equity interest felled the company, which ultimately filed for bankruptcy after less than a year of Versa ownership. U.K. sports retailer Sports Direct emerged as a stalking horse bidder and in mid-April received the approval of the Delaware Bankruptcy Court to acquire certain assets of Eastern Outfitters LLC, including the businesses of Bob's Stores and Eastern Mountain Sports for $101 million in cash, giving the British retailer a footprint in U.S. brick-and-mortar retail and a platform from which to grow U.S. online sales.


Most recently, Eastern Outfitters has been working on a deal with U.K. sports retailer Sports Direct International, to decide which stores to shutter. Sports Direct acquired the bankrupt chain in April.


Wet Seal

2017-02-02
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Wet Seal has been flopping around on jagged rocks for well over a decade, its fate made slippery by the fickle predilections of its target demographic and the arrival of fast fashion. While its surf-and-sun aesthetic was once embraced by American teens in the early 2000’s, all that changed and between 2013-2015 the retailer lost more than $150 million and defaulted on $27 million in senior convertible notes. Nearly 340 stores were shuttered shortly thereafter in its first Chapter 11 filing in 2015. Through bankruptcy, the retailer was bought by private equity firm Versa for $7.5 million in cash.


As logoed-T-shirts and mall hangouts fell out of fashion, Wet Seal failed to differentiate from similarly struggling rivals - Abercrombie & Fitch, Hollister and Aeropostale - and a turnaround stalled. Wet Seal was given a second life when it emerged as a private company with the aid of of Versa. But the private equity demands placed on the company led it into even deeper water, analysts told Retail Dive. Unable to find a buyer or draw in new capital, teen apparel retailer Wet Seal filed for bankruptcy protection again on Feb. 2.


Like some of its mall-based peers, such as American Eagle Outfitters and Aeropostale, falling foot traffic hurt the apparel chain. The California-based retailer had listed assets of $10 million to $50 million, and liabilities of $50 million to $100 million, according to a court filing.

The Limited

2017-01-17
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“This isn’t goodbye…” The Limited promised its customers as it shuttered some 250 remaining stores in January, just a few weeks before filing for Chapter 11 bankruptcy protection on Jan. 17. But without a physical presence, it was essentially goodbye for the women’s apparel retailer. It closed out 2016 as a shadow of its former self, beset by falling traffic and offering styles that can also be found at rivals like Loft and at department stores.


As it publicly planned to restructure, the retailer was missing key top executives. CEO Diane Ellis left to become president of women’s apparel brand Chico's in October after less than two months in that position. John Buell, who was elevated from his CFO role to interim CEO, abandoned ship in late December. Ironically, The Limited ultimately fell victim to the fast fashion philosophies it helped pioneer. “With Limited, one of the bigger challenges for them was the fast fashion industry and how quickly the fashion came into the marketplace,” Shelley Kohan, vice president of retail consulting at store analytics firm RetailNext, told Retail Dive. With a $26.8 million bid, private equity firm Sycamore Partners snapped up The Limited’s intellectual property, including its e-commerce business in late February, joining a portfolio that includes Belk department stores, Hot Topic, Nine West and Talbots.