Among all the stresses and tough decisions that filing for Chapter 11 brings onto already struggling retailers, there are a few bright spots to the process. Namely, it’s pace — if retailers want to move things slowly enough to wait and see if an angel investor or acquisition-happy competitor will come along at the 11th hour, there are ways to muddy up the legal process if it’s in merchants’ best interest.
However, dallying too long can tip those same companies out of the financial frying pan they’d just gotten used to and into the fire of wholesale liquidation.
It’s always a party here at the Chapter 11 Watch, isn’t it?
When Aéropostale first filed for bankruptcy protections in May, the prevailing wisdom was that the once-high-and-mighty teen apparel brand would be able to shake off some of its toxic assets and reorganize lighter and leaner than before.
The best laid plans of mice and men, though.
The Wall Street Journal is reporting that, as of Friday (July 15), Aéropostale has filed additional bankruptcy documents stating that it is no longer seeking a reorganization plan and will instead be focused on selling its assets in whole or in part to interested buyers. There’s a hard deadline of Aug. 22 for Aéropostale to begin selling whatever it has left at that point.
Interestingly, Aéropostale also went after a number of its former lenders and suppliers in the filing, citing Aero Investors and an unnamed group of the former as significant impediments to what chances Aéropostale did have at successfully reorganizing.
“While our merchandise repositioning ha[s] started to gain traction, the ripple effects of an ongoing dispute with our second-largest supplier put substantial strain on our liquidity, while also preventing us from realizing the full benefits of our turnaround plans,” Aéropostale CEO Julian Geiger said of the filing.
Aéropostale isn’t the only party coming away without “full benefits.” The collection of suppliers it’s claiming to be immune from could be out to the tune of $340 million.
This week’s Chapter 11 Watch kicked off with a retailer that had just hit a wall head-on after weeks of carefully navigating bankruptcy’s choppy waters, and it continues with Sports Authority — another brand that’s been long in the dying. Unlike Aéropostale, though, Sports Authority’s road to retail perdition may be finally, mercifully, over.
The Denver Post reported that, though the sporting goods chain had planned on rolling down the shutters on its stores at the end of August, store managers were summoned to a conference call last week by corporate and told that the timeline had been accelerated. Now, Sports Authority, its 460 stores and its 14,000 employees are set to expire before the month is out.
“I have a good store, one of the better performers, and I had hopes right up to the end that someone would buy us,” an anonymous manager of a New England-based Sports Authority location told the paper. “It’s disappointing, but I’m a professional, and I am going to do what I am supposed to do.”
Misery loves company, though, and there’s equal pain this week on both sides of the Atlantic. The Guardian is reporting that U.K.-based apparel retailer Store Twenty One is prepared to close 77 of its 202 stores in 120 days instead of falling into British bankruptcy known as administration. It seems like getting to that number was torture, too. Store Twenty One managed to negotiate with landlords for 17 of its stores to receive a 25 percent rent reduction and for 80 other locations to move to a monthly rent system.
“We would like to thank all of our employees, creditors and other stakeholders for their support in what we know has been a very difficult time,” said Pravin Soni, director of Store Twenty One. “The directors and management team now look forward to focusing on the future of Store Twenty One and working with everyone to make this business a success for many years to come.”
So far, that makes two strikes against American brands and just one against those of jolly old England’s. However, fate has a funny way of evening things out like this.
After declaring administration months ago, U.K. department store chain BHS will be closing the first of 20 total stores this week, which will put 600 employees out of work. By July 25, three locations in High Wycombe, South Shields and Slough will be no more, as will the 600 jobs they provided.
“We believe there is hope for the remaining stores with the administrators continuing to seek buyers,” U.K. labor advocate Dave Gill told Oxford Mail. “In the meantime, we are providing the support, advice and representation our members require at this difficult time.”
Just not new jobs.