It’s no secret the retail industry is undergoing a transformational period that has many scaling back physical operations, shuttering stores, reorganizing mounting debt loads and in some cases ending up in bankruptcy court.
Distressed bond issuers in the U.S. retail and apparel markets are nearing recession levels, tripling in the past six years, according to a report released by Moody’s Investors Service. The report found 13.5% of Moody’s retail and apparel portfolio is distressed, compared to 16% during the Great Recession. Debt maturities are also headed toward record levels over the next five years and retailers are filing for bankruptcy at a record rate.
Here is a running list of major retailers that have filed for Chapter 11 bankruptcy protection in 2017:
Filing date: Jan. 17
Outcome: Bought by Sycamore Partners for $26.8 million
“This isn’t goodbye…” The Limited promised its customers as it shuttered some 250 remaining stores in January, just a few weeks before filing for Chapter 11 bankruptcy protection on Jan. 17. But without a physical presence, it was essentially goodbye for the women’s apparel retailer. It closed out 2016 as a shadow of its former self, beset by falling traffic and offering styles that can also be found at rivals like Loft and at department stores.
As it publicly planned to restructure, the retailer was missing key top executives. CEO Diane Ellis left to become president of women’s apparel brand Chico’s in October after less than two months in that position. John Buell, who was elevated from his CFO role to interim CEO, abandoned ship in late December. Ironically, The Limited ultimately fell victim to the fast fashion philosophies it helped pioneer. “With Limited, one of the bigger challenges for them was the fast fashion industry and how quickly the fashion came into the marketplace,” Shelley Kohan, vice president of retail consulting at store analytics firm RetailNext, told Retail Dive. With a $26.8 million bid, private equity firm Sycamore Partners snapped up The Limited’s intellectual property, including its e-commerce business in late February, joining a portfolio that includes Belk department stores, Hot Topic, Nine West and Talbots.
Filing date: Feb. 2
Outcome: Bought by branding firm Gordon Brothers for $3 million
Wet Seal has been flopping around on jagged rocks for well over a decade, its fate made slippery by the fickle predilections of its target demographic and the arrival of fast fashion. While its surf-and-sun aesthetic was once embraced by American teens in the early 2000’s, all that changed and between 2013-2015 the retailer lost more than $150 million and defaulted on $27 million in senior convertible notes. Nearly 340 stores were shuttered shortly thereafter in its first Chapter 11 filing in 2015. Through bankruptcy, the retailer was bought by private equity firm Versa for $7.5 million in cash.
As logoed-T-shirts and mall hangouts fell out of fashion, Wet Seal failed to differentiate from similarly struggling rivals – Abercrombie & Fitch, Hollister and Aeropostale – and a turnaround stalled. Wet Seal was given a second life when it emerged as a private company with the aid of of Versa. But the private equity demands placed on the company led it into even deeper water, analysts told Retail Dive. Unable to find a buyer or draw in new capital, teen apparel retailer Wet Seal filed for bankruptcy protection again on Feb. 2.
Filing date: Feb. 6
Outcome: Bought by Sports Direct for $101 million in cash
Eastern Mountain Sports, founded in 1967 in Massachusetts by two climbers, and Connecticut-based discount retailer Bob’s Stores were once popular sellers of outdoor apparel and gear in the Northeast. While the companies enjoyed a steady period of growth and profitability, financial stability did not last.
In 2016, Eastern Outfitters’ previous owner, Vestis Retail Group, shuttered regional sports retailer Sport Chalet in order to focus on the Bob’s and Eastern Mountain Sports operations. It ultimately sold those retailers to Versa Capital Management, which restructured the companies under the parent company Easter Outfitters LLC at the time.
Fierce competition in the sporting goods space and private equity interest felled the company, which ultimately filed for bankruptcy after less than a year of Versa ownership. U.K. sports retailer Sports Direct emerged as a stalking horse bidder and in mid-April received the approval of the Delaware Bankruptcy Court to acquire certain assets of Eastern Outfitters LLC, including the businesses of Bob’s Stores and Eastern Mountain Sports for $101 million in cash, giving the British retailer a footprint in U.S. brick-and-mortar retail and a platform from which to grow U.S. online sales.
Filing date: March 1
Outcome: Marquee Brands and Global Brands Group Holding Ltd. acquired intellectual property and assets for an undisclosed amount
BCBG Max Azria Group had been floundering for years leading up to its bankruptcy filing on March 1. The brand portfolio struggled to win a following and maintain sales while the company struggled under a debt load that by 2013 had risen to $685 million. Longtime investor Guggenheim Partners was responsible for $475 million of that. In 2015, BCBG received $135 million from investors to help restructure that debt, but problems persisted. In January 2017, the company hired business management consultant AlixPartners to tackle the challenge. By the beginning of New York Fashion Week in February 2017, BCBG, a 20-year veteran of the show, was making headlines for bankruptcy buzz rather than its clothing.
On June 9 BCBG announced that two companies in a stalking horse bid — Marquee Brands and Global Brands Group Holding Ltd. — would buy for an undisclosed amount most of its assets in bankruptcy. Per the plan, Marquee would acquire the intellectual property of the flagship BCBG brand, and Global Brands would acquire assets associated with the operation of the BCBG business. Many saw the outcome as the most hopeful in the rash of recent retail bankruptcies, with the long-respected BCBG Max Azria brand kept alive by its buyers.
Filing date: March 1
Outcome: Pending court approval for reorganization
Grand Forks, North Dakota-based Vanity was founded as a private company in the 1950s selling apparel and accessories for young women. By 2013, its store fleet had grown to 170 stores in 26 states. But the good times wouldn’t last.
By March 2017, the mall-based specialty apparel retailer succumbed to declining foot traffic and changing consumer demands, and began advertising a “going out of business” sale. That month it filed to reorganize under bankruptcy protection with a plan to shutter all of its stores. While a restructure is still pending, its e-commerce website is currently disabled although it promises shoppers, “We’ll be back soon!” Whether it will, remains to be seen.
Filing date: March 6
Outcome: Announced court approval to liquidate on April 7
Aside from booksellers, electronics retailers were some of the most notable victims to be wiped out by Amazon’s e-commerce dominance. Amazon accounted for a whopping 90% of the $5.6 billion growth in consumer electronics sales posted nationwide in 2015, according to a note last year from Deutsche Bank analysts, and Hhgregg was unable to face down the competition.
The electronics, home furnishings and appliance retailer, founded in Indiana in 1955, became a multi-regional chain in the late 20th century. As competition heated up in the space, from Amazon as well as Best Buy, Sears and J.C. Penney, CEO Robert Riesbeck took measures in 2016 to shake up the company’s senior management, expand its free delivery options, boost digital efforts and streamline the supply chain. On March 3 2017, the retailer announced a 40% reduction in its store fleet, some 88 underperforming stores and three distribution centers, resulting in 1,500 job cuts. News of the turnaround came amid reports of an imminent bankruptcy filing, which was ultimately filed three days later. At the time, Hhgregg said it had lined up an anonymous buyer (which appeared to be the retailer’s ad agency Zimmerman Advertising). But by the end of March, the company acknowledged the deal had collapsed. A month later, the retailer threw in the towel, receiving court approval for a plan to close its remaining 220 stores and liquidate its assets.