Risk Management

Chapter 11 Watch: Austin Reed Bids Farewell, Staples Plots A New Course

Retail Struggles With Bankruptcy Problems

Retailers are entering that time of the year where high temperatures settle over just about every part of the continental U.S., so blaming poor sales on equally poor weather won’t be a viable tactic much longer. No, now that May has given way to June, the lowest-achieving merchants out there have nothing but the warm light of day in which to reflect on their follies.

Granted they’re still solvent enough to actually reflect on said mistakes.

 

Bankruptcies

In the United Kingdom, they don’t have Chapter 11 protections. Instead, businesses in the British Isles go into what’s known as administration, while third-party adjudicators try to sort out what’s what underneath a mountain of financial uncertainty. For some U.K. brands like apparel retailer Austin Reed, though, the weight of all that financial baggage is too much to crawl out from under.

AlixPartners, the parent company of the 116-year-old retailer, admitted on Tuesday (May 31) that it was forced to shutter the Austin Reed name after no adequate buyers came forth to salvage assets after the company slid into administration in mid-April. Out of 120 full-fledged store fronts and nearly 1,000 staff members, just five outlet village kiosks and 28 total associates will transition over to new owners at Edinburgh Woollen Mill.

“Despite a significant number of interested parties coming forward during this period, it became clear as the process progressed that a viable solution which kept the business whole was not forthcoming,” Peter Savile, joint administrator of the Austin Reed deal, said in a statement. “As a result, we have made the difficult decision to cease trading the business and commence a wind-down of the estate.”

Chalk it up to another apparel retailer lost to the new fabric of fast fashion.

 

Store Closures

There’s less and less reason for consumers to actually leave their houses, even when it comes to checking off some rather routine errands, and if shoppers do manage to resist the Amazon Freshes of the world, what are the odds they’ll choose the smaller, regional supermarket brand than the larger, more recognizable one?

According to Mars Super Markets, whatever the odds are, they aren’t in its favor. The Baltimore Sun is reporting that the Mars brand, which operates 13 stores across Maryland, will be selling off five of its locations and shuttering the remaining eight. Weis Markets will be picking up the handful of stores that won’t be left to return to the dust, and in a note to employees obtained by the Sun, Mars Chairman and CEO Chris D’Anna confirmed that the announcement was a long time coming for the embattled grocery brand.

“As you all know, the company has been struggling with declining sales for several years,” D’Anna explained. “We have tried cutting costs everywhere we can, while preserving jobs and benefits, but it has not been enough.”

Small and nimble might be the playbook to taking down established fashion brands like Austin Reed, but just the opposite dynamic is at work in the grocery market.

 

Layoffs

It seems like years since the first hints of a Staples-Office Depot merger first started to emerge, and it seems like just as many years since the merger was soundly rejected by the Federal Trade Commission. As both companies try to figure out ways forward after their last brilliant plan was shot down, Staples at least is making a clean break with the past, no matter what the future holds.

Staples announced on Tuesday (May 31) that Ron Sargent had officially agreed to step down as CEO effective immediately after the company’s annual shareholders meeting on June 14. Shira Goodman, Staples’ president of North American operations, will slide into the position as interim CEO, though not without the company’s board nursing a heavy heart for Sargent.

“Under Ron, Staples made consistent advancements that ensured and extended the company’s market leadership in the office products sector,” Robert Sulentic, independent lead director of the Staples board of directors, said in a statement. “Most notably, he drove the growth of the commercial contract business, which is central to Staples’ go-forward strategy. He also worked diligently on the acquisition of Office Depot, and the board appreciates the strong effort he made to secure governmental approval. With the termination of the merger, we mutually agreed that now is the right time to transition to new management to lead Staples through its next phase of growth.”

It’s just further proof that when retail plans go awry, very few can claim immunity from the ill effects that result.

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