Two iconic retailers forced to file for bankruptcy, hundreds of stores to close
It has been another terrible week for retail as two more iconic companies reveal plans to file for bankruptcy, resulting in at least 300 stores potentially closing.
RadioShack announced the contemplation of filing for Chapter 11 bankruptcy, which would be the second time they have done so in two years. 200 out of 1,500 stores were already set to close this year, but additional stores could follow suit if Sprint agrees to end leases for its “stores within stores” concept at some locations. The company has already laid off dozens of employees at its Dallas Fort-Worth headquarters.
In 2015, more than 1,740 RadioShack stores were sold for $26 million to hedge fund Standard General at a bankruptcy auction. CEO Dene Rogers attempted to rebrand the stores and explore a partnership with mobile retailer Sprint. The new route, however, failed to gain much traction, especially going up against online giant Amazon which has taken much of the market share in peripherals and batteries.
The RadioShack bankruptcy comes less than a week after appliance store hhgregg announced plans to file for bankruptcy as well, a sad trend that we’ve seen so much of so early in the new year. Hhgregg also announced plans to close at least 88 stores in 15 states.
Gordmans, a 100-year-old Midwest department store chain, also appears to be ready to file for bankruptcy, with some even expecting the announcement to be made by the end of this month. While not too much information has been formally shared, what we do know is that Gordmans stock has been trading below $1 since September of last year. In November Nasdaq sent the company a “deficiency letter” letting them know that if the stock doesn’t rise above the $1-per-share requirement by May 1, it will be delisted from the exchange.
Gordmans operates about 100 stores in the upper Midwest states. The company employed 350 people at its Aksarben Village headquarters as of November but laid off an undisclosed number of those employees in January, blaming a “current sluggish retail environment.” In recent years, Gordmans has struggled and its growth slowed in 2014, causing losses to begin to mount. That same year the company replaced Jeff Gordman as CEO with Andy Hall. At first there appeared to be some turnaround as Hall added new merchandise to stores, launched a companywide cost-cutting initiative and halted what retailing analysts had deemed the chain’s excessive use of coupons and sales. The positive results were short-lived, and sales stagnated or declined through 2016. The retailer has about $85 million in debt, with much of it due in 2020.
It appears RadioShack and Gordmans are the latest victims in this tough retail climate that continually suffers from sluggish mall traffic and a move by apparel shoppers to the internet. Analysts have said the retailing industry is under pressure from several angles: the rise of online shopping; increasingly savvy consumers who are less interested in buying things and more interested in spending money on experiences; and retailers’ reliance on sales and coupons to drive foot traffic because those coupons hit profits.