Risk Management

Chapter 11 Watch: Retailers Head Back To School, Jewelry Loses Its Shine

Retailers Flirt With Chapter 11

The dog days of summer are finally upon the retail world, and if department stores didn’t take the spring and early summer to make up for the slow sales of a warm winter, it might be too warm and muggy to do much about that now.

With nothing else to do, then, merchants continue paddling against the current of retail bankruptcies, and though this week’s Chapter 11 Watch might be lighter with filings than is custom, it’s made up it in spades with hand-wringing and doom-and-gloom prognostications.

As always, a good time had by all.

Bankruptcies
If the heat doesn’t conspire to drum up retailers’ nerves this time of year, then the worrying over back-to-school sales might just do the trick. Even though trapper keepers and pencil cases have been replaced by laptops and iPads, back-to-school season still represents a kind of non-holiday shopping season.

Or at least it did.

According to an unnamed source speaking to The New York Post, teen brand Claire’s Stores is putting a good deal of eggs into the basket of high back-to-school sales. Though things are still fluid at this point, the source hinted that if shoppers don’t turn out for rhinestone-covered accessories and pre-teen apparel this August, it could be belly-up for the chain.

“The situation depends on the real cash flow in the next couple of months,” the anonymous source told the Post. “You have to think more likely than not it will result in bankruptcy.”

Claire’s currently operates around 3,000 stores — a large enough footprint to pay for when business is going well — but its same-store sales in a 10-week period ending July 10 were down 5.9 percent compared to the same timeframe in 2015.

“This is still an emerging situation, and no one knows how it will turn out,” the source said.

Store Closures
Diamonds might be a girl’s best friend, but those in the diamond selling business haven’t been treated so poorly by the prices of the precious gems. However, no business is a sure-fire hit forever, and one of the world’s longest-running jewelry chains is heading back to the rough.

Canadian jewelry retailer Ben Moss Jewellers announced Friday (July 29) that it would be shuttering all of its 54 storefronts as soon as possible. Going-out-of-business sales began the next day, with some merchandise discounted by up to 40 percent.

“After considering all of our restructuring options, including selling all or part of the business as a going concern, we have determined that this is the best course based on the challenges we are facing,” Manzoor said in a statement.

The decision comes months after Ben Moss had to part ways with 11 of its least successful locations in a bid to gain more financial certainty over its situation. Despite bringing on Gordon Brothers Group Canada to consult in their time of need, though, it seems as if Ben Moss and all its precious gems aren’t so any more.

Layoffs
While North American retailers don’t seem to have had the best week, what about the rest of the world? India, for example, has long been lauded as a crucible of perpetual growth (especially by Western companies increasingly desperate for it), but one of its strongest eCommerce operations isn’t looking so healthy at the moment.

The Times of India reported that Flipkart is embroiled in something of a labor controversy surrounding layoffs that allegedly might climb as high as 1,000 employees shown the door. While official statements from the company make the dismissals seem like a regular and periodic part of Flipkart’s employee evaluation policies, employees of other Indian-based eCommerce companies say that the delivery of new and often unrealistic performance requirements is often grounds for removal.

“It was impossible to meet those new parameters,” an employee released from startup Noida under similar circumstances told the TOI. “The irony is, we had great appraisals a few months ago.”

Just another checkmark in the column supporting retail’s preference for the ethos of “What have you done for me lately?”

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