John Lennon and Paul McCartney sang that they got by with a little help from their friends, and when retailers are teetering on the brink of bankruptcy, the backing of a financially sound ally can mean the difference between restructuring and liquidation.
At the rate merchants are going under in 2016, though, it means angels like these are in shorter and shorter supply, and when they do pop up, they might not have the deep pockets sinking retailers need.
Or so the story goes in this week’s Chapter 11 Watch.
Bankruptcies
This isn’t the first time that brick-and-mortar entertainment media chain Hastings has graced the Chapter 11 Watch, but it just might be the last.
The Texas-based retailer announced that, since declaring its intention to find a buyer for its business back on June 20, no suitable candidates have emerged to save Hastings’ stores. As a result, the chain has already started conducting going-out-of-business sales at some or all of its 123 store fronts as of Saturday (July 23).
It wasn’t how Hastings President and COO Jim Litwak expected his company to meet its end, but it’s the cards that have been dealt.
“Our hope was that the Chapter 11 process would help to prepare our business for the intended sale, while also providing additional protections and financing to allow us to serve our customers as usual,” Litwak said in a statement. “Unfortunately, this process was unsuccessful.”
It might not be too surprising that a B&M-reliant entertainment media company had trouble finding a buyer in 2016, but what will come as a shock is filling the more than 120 store fronts Hastings’ departure will leave behind.
Store Closures
In Hastings’ case, the shuttering of its stores has to happen on a tight schedule so as not to run afoul of a spiderweb of financial obligations. However, other brands that want to make a slight course correction can close stores with a lighter touch.
That’s what Australia’s Woolworths is planning on doing with between 27 and 61 store fronts it might close as part of a strategic pullback. Not only are Woolworths executives focused on limiting the damage to its own operations, but The Sydney Morning Herald is reporting that they’re also keeping a close on eye how much their competitors stand to benefit from their drawback in certain markets.
Unnamed sources tell the Herald that Woolworths is only looking to close stores in areas where an Aldi or Coles location is also present and could stifle the growth of an upstart that takes Woolworths’ place. That only applies to 27 of the potentially shuttered stores, though. The remaining 34 are at the mercy of expiring leases and Woolworths’ willingness to renew.
However, considering JPMorgan analysts’ recommendation that “trading and turnaround progress commentary is positive but limited in its scope,” it’s difficult to see the retailer saving a lion’s share of its store fronts moving forward.
Layoffs
Store closures and layoffs are two sides of the same coin, but it’s understandable why retailers themselves might want to think of things in terms of the former. It’s equally comprehensible, then, that retail employees have their ears to the ground when it comes to decisions affecting their jobs.
The Inquisitr is reporting that rumors have begun to spread among employees at Kmart that all of the chain’s nearly 1,000 stores could be closed by this time next year. Employees report that wage reductions and strategic layoffs are being conducted in what workers see as clear signs of pre-liquidation maneuvers. Most tellingly, though, is that inventory is being moved out of backrooms and onto store floors to maximize selling space — even if new displays and shelving needs to be constructed to hold it.
“Sears Holdings is highly focused on restoring profitability to the company, and Kmart remains a key piece of our asset portfolio,” a Sears spokesperson told The Inquisitr.
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