Risk Management

Chapter 11 Watch: Hastings Goes Dark, Ralph Lauren Unpops B&M Collar

Hastings, Ralph Lauren Struggle

The dog days of summer are almost upon the retail world, and if a warm winter wasn’t enough to suppress sales at some of the most established brands in the industry, the next few months could have a real impact on the look of the overall landscape. Whether that means the need for smaller footprints for some or the elimination of others entirely, only fate (and the consumers who solidify that fate) can say.

Unfortunately for the retailers who made this week’s Chapter 11 Watch, both have already spoken.

Bankruptcies
The biggest fish to go belly up across the midpoint of June came from an industry which has produced some heavy-hitters in the past. In fact, it seems a testament to what Hastings Entertainment was doing right that it managed to last so long in the beleaguered bricks-and-mortar books and entertainment sales category. Time cuts down even the largest mountain of paperback and hardcover books, though, and so do goes Hastings.

The Amarillo, Texas-based media retailer announced Monday (June 13) that it had officially filed for Chapter 11 protections. Its website was also amended to include notices that gift cards will only be honored up to July 13, and its product buyback program has been halted immediately. Hastings officials confirmed that the business is destined for sale, as are its parent company, Draw Another Circle, and cohort brands Movie Stop and SPImages.

How likely that sale is remains to be seen. Comics Beat published documents relating to Hastings’ Chapter 11 filings, which included itemized debts to the retailer’s creditors. At the top of that pack was toy designer Funko, which is more than $2.5 million in the hole thanks to Hastings’ demise. Closely following is Diamond Book Distributors and the $1.6-million hole in its hull, as well as several other six-figure blemishes on the company’s ledger.

The Midwest media chain’s stores are also thrown into sudden jeopardy, though it’s likely that at least some of its 126 stores will prove valuable to other merchants. Less certain is the fate of the 500 employees let go at Hastings’ Amarillo headquarters and the hundreds more employed in its stores.

Store Closures
Closing some stores may not be the panacea to over-expansion that most retailers hope it is when they try it, but it’s never a bad start. Rather than Hastings’ abrupt but inevitable fate, that seems to be the goal of Ralph Lauren as it attempts a runway pivot in both thought and deed.

At a recent investors’ meeting, CEO Stefan Larsson announced a sweeping new initiative to de-emphasize the time and resources it puts into under-performing brands. Instead, the bulk of the company’s efforts will go to supporting and promoting it’s three highest-selling lines: Ralph Lauren, Polo Ralph Lauren and Lauren Ralph Lauren.

“Continuing with this vicious cycle is going to hurt the brand,” Larsson said, via The Washington Post

But to feed one darling, another must be starved. The company expects to shutter at least 50 stores in a realignment toward its core business, and while corporate maneuvering will bring a combined $220 million in savings to its coffers, Ralph Lauren will still be bidding farewell to upwards of 1,000 jobs.

Layoffs
Can a store close if it never really opened? Can an online retailer be affected by brick-and-mortar trends? Questions for the philosophers, perhaps, but Birchbox is testing them out in the real world now.

The subscription box of cosmetics subscription boxes, Birchbox recently announced plans that contradicted earlier plans to open up three brick-and-mortar storefronts across the U.S. Instead, no stores will be opened, and 50 of its 300 employees will be let go as a result. The issue, evidently, stems from lack of cash flow – Birchbox has hired JPMorgan Chase as a consultant to help it acquire cash or a buyer.

It seems an abrupt turn of events for what was once a flagship brand for a burgeoning market, but like most things in retail it’s better off not getting attached – financially or otherwise.

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