Retailers to watch for when filing for bankruptcy in 2020

Chapter 11 bankruptcy filings by retail businesses and restaurants continued to make headlines in 2019. According to CNBCthere were 23 retail bankruptcies in 2019, compared to 17 in 2018.

Six (6) retailers and one (1) restaurant chain that were on our “Watchlist” in 2019 filed for Chapter 11 protection – Charming Charlie (Part 2), forever 21, Without payment (Part 2), Charlotte Russian, Things we remember, Gymborea (Part 2)and Perkins and Marie Callender.

As the new year unfolds, here are 10 retailers to watch for possible Chapter 11 filings in the coming year.

  • Pier 1 imports – a deposit this month? Gone are the days of shoppers coming to Pier 1 for a single product. Now these items can be purchased online or from other retailers. According CNBC, the company plans to close up to 450 of its 936 stores, cut its head office staff by 40% and close its distribution centers as part of cost-cutting measures. The company had a series of quarters with declining sales. Recently, it announced its third-quarter loss of $59 million, after same-store sales fell more than 13% last year. Bloomberg signals that the company is preparing to file for bankruptcy.
  • Fairway markets – Chapter 22 filing? The company filed for Chapter 11 in May 2016, successfully emerging in less than three (3) months in July of the same year. The New York Post reports that the company is preparing another bankruptcy filing after failing to find a buyer for its 14 stores in the New York tri-state area, including four (4) liquor stores, making it a bankruptcy filing in under Chapter 22 (two Chapter 11s in a row). Fairway recently closed its Nanuet, New York store in September. Currently, the company has over $170 million in debt maturing in 2023/2024.
  • Bed bath and beyond – With more than 1,500 stores in the United States and Canada, including buybuy BABY and Cost Plus World Market brands, the retailer said it will be closing approximately 60 stores in 2020, according to The Motley Fool. The big-box retailer saw its stock drop from $70.00 in 2013 to $7.34 in 2019. In November 2019, the company began internal moves that helped boost the stock price. However, the company fundamentally failed to compete with online retailers, unlike its competitors The Home Depot, Target and The TJX Companies.
  • Ascena Retail Group – Last year, with more than 3,400 stores, the owner of womenswear brands (including Loft, Ann Taylor, Justice, Lane Bryant and Catherines) continued to tighten its belt with a turnover in the c suite, selling a majority stake in Maurices and its formwork of Dressbarn. At the end of 2019, the company said its sales were down 4%, it maintained long-term debt of $1.3 billion and had an operating loss of $354 million. Although, according to chain store age, the CEO announced in October that bankruptcy was not considered an option. Still, the women’s retail apparel market is tough with online sales and competition. Unless a reversal happens soon, bankruptcy may be the only option.
  • GameStop – Following the road to successful video? Retail diving reports that the company was on track to close approximately 200 of its 5,000 stores worldwide by the end of 2019. In a press release, the company cited a drop of more than 14% in global sales in the second trimester. With more than 3,500 stores in the United States, the company continues to adapt to changing consumer shopping habits. Could GameStop be the next Blockbuster, now that gamers can buy games easily online through their consoles?
  • Francesca- According Alpha Street, the Houston-based women’s clothing and accessories retailer, continued to cut costs by closing more than 10 of its more than 700 stores and laying off a significant portion of its staff. However, last summer the company secured $10 million in new funding. Despite the belt-tightening, the company appears poised for a possible Chapter 11 filing as it strives to both drive traffic to its top fashion trends and compete due to the continued shift in demand. customers from physical stores to online sites.
  • Crew – A feeling of “Boredom” in stores, according to vanity lounge? The privately owned retailer continues to try to become a premium retailer, but it has also introduced an athleisure line as well as a separate denim line – Madewell – into the mix. The Wall Street Journal reported that it created Madewell, the denim line, enabling a debt-free balance sheet that could help in the short term. However, the company’s losses of over $120 million over the past two (2) years, its identity crisis, and feeling bored at one of its stores, as noted by Vanity Fair, are a challenge.
  • JC Penney – According Business Intern, despite the company stabilizing its profitability in 2019, it is still struggling to create an experience for consumers. The 117-year-old company has more than $4 billion in debt, the majority of which is due in 2021 according to bisnow. Although the company has taken initiatives to reinvent its more than 800 stores, it may be a little too late – a bit like Sears? The Observer recently felt that a purchase by Best Buy, Wayfair or Lowes could actually make the company relevant again.
  • Stein-Mart Retail diving reports that despite positive earnings in the first quarter of 2019, the company’s top sales have fallen in recent years. The company has taken steps to install self-service Amazon lockers in about 200 of its 283 stores to drive traffic. With tight margins and online retailers, the company faces difficulties and could be forced to file for bankruptcy.
  • Ritual AidInvestors Square reporting with more than 2,400 stores, Rite-Aid remains challenged and engaged in an unending turnaround plan. Although Fred’s retail pharmacy bankruptcy filing may have freed up market share, the company continues to struggle for survival in a competitive pharmaceutical environment. Bankruptcy may be the only way to reduce the footprint to truly turn the business around.

If you are an owner, developer and/or lessor, it is important to know and understand how these changes will affect your shopping centre.

COPYRIGHT © 2022, STARK & STARKNational Law Review, Volume X, Number 8

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