Earlier this year we noted 10 potential retailer bankruptcies to watch in 2019. Four (4) of those retailers, Payless, Gymboree, Charlotte Russe, and Things Remembered, filed within months of our report.
The following is a revised list of potential Chapter 11 retailer bankruptcy filings to watch for during the second half of the year.
- Francesca’s – Houston-based, boutique women’s apparel and accessory retailer, has struggled tremendously during the last year: six (6) consecutive quarters of double-digit losses in same-store sales; the exit of CEO, Steve Lawrence; closing of at least 20 of its 700-plus stores; and a stock price that has declined -92.50% over the last 52-week trading period. Plus, it’s almost impossible to get someone on the phone when you call the main office. All signs point to a Chapter 11 filing.
- Forever 21 – CNBC reports that Forever 21 is exploring restructuring options, including bankruptcy. The fashion giant struggles competing in the teen clothing retail environment, just like others that filed for bankruptcy in the last few years – Aeropostale, Rue21, and American Apparel. With more than 815 stores in the U.S. and worldwide, the company is reportedly in talks with private equity firm Apollo Global Management about debtor-in-possession financing.
- Perkins & Marie Callender – Restaurant Business reports that the Memphis, Tenn. company is for sale and that a bankruptcy filing is possible. The family-dining chain previously filed in 2011. The company operates more than 400 locations in the two brands, including 400 Perkins Restaurant & Bakery locations (134 company and 266 franchised) and 38 Marie Callender’s restaurants (8 company and 30 franchised).
- Charming Charlie – Part 2? – The company filed for Chapter 11 in December and exited bankruptcy a few months later. It emerged from Chapter 11 with 264 stores. However, the market is quite tight and the real question is whether the company can adapt to consumer demands. The company looks to be on par with other retailers, who filed for Chapter 11, only to refile (a Chapter 22) within a year or two like Payless, RadioShack and Gymboree.
- General Nutrition Centers (“GNC”) – CNN reports that GNC and other retailers are still struggling with too many locations. Since 2017, the company closed more than 700, but that may not be enough to stave off a Chapter 11 filing. The company still operates more than 3,000 stores. With its competitor Vitamin World using the Chapter 11 process in 2017 to rid itself of unfavorable leases, GNC is a likely candidate to do the same in 2019.
- Mattress Firm – Part 2? – The company emerged from Chapter 11 only a few months after it filed in October 2018. Downsizing its locations to 2,600 stores helped, but the company did not receive the initial concessions that it sought from landlords in the restructuring process. The company continues to be under pressure from both e-commerce and big box sellers.
- Dress Barn – Company held a landlord conference call on May 29 requesting 90% of landlord to agree to a wind down of its 650 stores by June 30, 2019. Unlikely that 90% of landlords will agree to this commitment (further this wind down does not stop Dress Barn from filing for bankruptcy). CNN reported that Dressbarn’s parent company, Ascena Retail Group noted that any winddown or bankruptcy would not affect other brands, including Ann Taylor and Loft.
- 99 Cent Only – This discount retailers faces stiff competition from rivals, like Dollar General and Dollar Tree, as well as Walmart and Amazon. Reports show the chain is losing money because of operating expenses. A sure fire remedy for that is to cut retail locations through a Chapter 11 bankruptcy.
- Pier 1 Imports – It seems like Pier 1, year after year avoids a bankruptcy filing. But a $51.1 million loss in 2018 (a more than 500% increase from its loss in 2017) makes the filing almost assured. USA Today reported that Pier 1 announced in April 2019 it could close as many as 145 of its 973 stores. Further, S&P downgraded Pier 1’s credit rating from CCC+ to CCC-.
- PetSmart, Inc. – With 1,500 stores, the company faces heavy competition from e-commerce, including Amazon’s Wag brand launched in 2018. To circumvent this, PatSmart purchased “Chewy” an e-commerce site for a whopping $3.35 billion! This acquisition has added to the company’s existing debt that matures after 2020. If the new acquisition does not stem the losses, expect a 2019 filing.
- J. Crew – The company tried in 2018 to rehab into more of an upscale retailer. Yet, the strategy apparently did not work. Declining sales and continued store closings do not bode well for this retailer. Earlier this year the company hired restructuring attorneys at Weil, Gotshal & Manges LLP, the firm that recently assisted Sears through its bankruptcy proceeding.
- Neiman Marcus – The Dallas-based luxury retailer’s faces e-commerce competition and changing consumer preferences. However, recent job cuts and digital presence has made a string of quarters positive and the company more likely to turn things around. Still interest expenses are keeping the company in the red and a likely reason for a filing.
If you are an owner, developer, and/or landlord it is important to know and understand how these changes will affect your shopping center. Stark & Stark’s Shopping Center and Retail Development Group can help. Our shopping center attorneys regularly represent owner, developer and/or landlord throughout the country, in leasing, buying/selling, 1031 Exchanges, refinancing, as well an enforcement activities. One of our specialties is bankruptcy representation for owners, developers and/or landlords, nationally. Currently, our team is providing value-added services to landlords in a number of Chapter 11 cases including: Sears, Shopko, Toys R Us, Mattress Firm, Payless, EMS and Eastern Outfitters (aka “EMS Part II”), Gander Mountain, Golfsmith, RadioShack, General Wireless (aka “RadioShack Part II), Fairway Market, and A&P.
For more information on how Stark & Stark’s Shopping Center and Retail Development Group can assist you, please contact Thomas Onder, Shareholder at (609) 219-7458 or firstname.lastname@example.org. Mr. Onder writes regularly on commercial real estate issues and is an active member of ICSC, and is State Chair for ICSC PA/NJ/DE region.