07/21/2017 / By Rhonda Johansson
The number of retail stores who have filed for Chapter 11 Bankruptcy within the first half of this year is the highest the country has ever seen since the Great Recession. In only the first three months of 2017, nine retailers declared themselves bankrupt. That is equal to the total for all of 2016. Financial analysts worry that this year may be at par with the national economic turmoil in 2009, when 18 retailers went under. Economists have stated that the reasons behind this depression lies in more consumers preferring to shop online along with a shift in shopping sensibilities, wherein more people are opting to travel and dine out rather than spend on clothes. Another factor is leveraged buyouts. This is where a private equity firm purchases a struggling retail store, inevitably saddling the latter with more debt in the process. A report on CNBC.com showed that the number of bankruptcy filings by such partnerships had increased by 31 percent over the prior five years.
As we enter the second half of the year, it would do well to recognize all the stores that have filed for bankruptcy.
- The Limited – The retail store filed for bankruptcy last January 17 after it closed all its 250 remaining stores. The group said that it would be transferring its assets online, although many industry analysts say that the store has reached the end of its era. The Limited was bought by Sycamore Partners for $26.8 million in February. This new portfolio now includes the Belk department stores, Hot Topic, Nine West, and Talbots.
- Wet Seal – An extremely popular brand during the early 2000s, the retail store saw a dramatic loss of sales in only a few short years. Wet Seal filed for a Chapter 11 bankruptcy in February and was officially bought by Gordon Brothers for $3 million.
- Eastern Outfitters – This used to be the go-to store for outdoor apparel and gear. Nonetheless, the company restructured itself last year to focus on its Mountain Sport arm. The move proved to be unsuccessful as fierce competition drove Eastern Outfitters to file for bankruptcy less than a year after it transferred ownership to Versa Capital Management. It has now been bought by Sports Direct for $101 million.
- BCBG Max Azria – The once-popular clothes brand has been floundering for the last few years. Most economists assumed the death of the brand in 2013 when it was revealed that their debt load had reached a massive $685 million. Going against the odds, BCBG somehow managed to stay afloat — although barely — for the next four years. Problems persisted within the brand, eventually causing BCBG to file for bankruptcy last March. Supposedly, Marquee Brands and Global Brands Group Holding Ltd. has acquired the intellectual property and assets of BCBG for an undisclosed amount. (Related: Major retail chains shutting down thousands of stores; are you prepared and self-reliant?)
- Vanity – The mall-based specialty apparel retailer saw a dramatic loss of sales as consumers changed their shopping habits. Vanity had reached its height in 2013, when it had around 170 stores in 26 states. It filed for bankruptcy last March.
- Hhgregg – Here’s one victim of Amazon’s massive e-commerce takeover. The electronics and appliance retailer was a well-known multi-regional chain in the late 20th century. However, entering 2016, Hhgregg announced that its fleet had been reduced by 40 percent which resulted to around 1,500 job cuts. The retailer threw in the towel last March and has closed its remaining 220 stores while liquidating all its assets.
- RadioShack – This was once the haven for all nerds. The almost 100-year-old company is planning on closing 200 stores and is evaluating its options for the remaining 1,300. Dene Rogers, the group’s CEO, blames the bankruptcy on poor mobility sales.
- Gordmans stores – Gordmans was a traditionalist — only entering the online environment in 2015. The move was too-little-too-late for the veritable retailer, as it filed for bankruptcy last March. In only a year, sales for the company fell by 75 percent. This led to a slew of job cuts and the imminent bankruptcy filing.
- Gander Mountain – The outdoor and sporting goods brand once boasted 162 locations in 27 states, with plans for 60 new stores. However, Gander Mountain found itself locked in intense competition with other outdoor retailers. Unable to find its footing, Gander sold itself to Illinois-based Camping World Holdings for $37 million last March. After the sale was approved, Gander announced that it would keep open 70 of its remaining 126 stores.
- Payless – The discount shoe retailer was once seen to be unstoppable, with branches popping up left and right in multiple states. Nevertheless, CEO of Payless, W. Paul Jones made a “difficult, but necessary, decision” last April when it filed for bankruptcy. Jones implicated the challenging retail environment as the main reason for the bankruptcy.
- Rue21 – Last April, the teen apparel brand began shutting down 400 of its stores nationwide. Only a month later, the group decided to declare itself bankrupt. This left Rue21 with around 800 stores and its e-commerce business. Its Chapter 11 bankruptcy contained provisions for restructuring plans to keep the company afloat.
- Gymboree – After missing an interest payment for its outstanding debt worth millions of dollars, children’s retailer Gymboree filed for bankruptcy last June. Analysts say that this was an inevitable outcome of its leveraged buyout from Bain Capital last 2010. As mall traffic continued to decline, the retail brand continued to see its sales drop. Gymboree has announced plans to close as many as 450 of its stores but hopes to emerge from this bankruptcy by the end of this year.
- Papaya Clothing – Papaya hopes to remain in operation, despite its bankruptcy filing. The retail store is the victim of its own success. When it first started in 1999, it rapidly expanded, opening around 50 stores in six years. It ran into a speed bump when it got involved in e-commerce. Faster off-price fashion retailers bullied their way into the market, effectively driving Papaya into debt.
- True Religion Apparel Inc. – Denim was once considered the “in” look. These days, not so much. As the demand for yoga pants and similar trends increased, the designer denim retailer struggled to maintain its relevance. By 2016, the company was $500 million in debt. Efforts to restructure and rejuvenate its business has proven to be unsuccessful. The company filed for bankruptcy last July 5 and signed a restructuring agreement with lenders for a debt worth $350 million.
This is quite a long list, and one made even more worrisome by the fact that 2017 has not even ended. Financial analysts refuse to make any predictions, but have noted that this disturbing trend of the “retail apocalypse” will continue.