2018 represented another busy year for Chapter 11 retail bankruptcy filings, with Sears dominating the headlines in the last quarter of 2018 and Toys “R” Us closing all of its US stores before the third quarter.
As the New Year unfolds, there could be companies in trouble in 2019. The following are retailers to watch for a possible Chapter 11 filing this year:
- Gymboree – a Chapter 22 filing? Like Payless that filed a Chapter 11 about year ago, Gymboree also filed a Chapter 11 bankruptcy petition and shed a number of unprofitable stores. Yet, both the Wall Street Journal and Retail Dive recently reported that Gymboree is seeking a bankruptcy loan for a possible second Chapter 11, in less than two years from the first Chapter 11 filing. Further, reports are that the filing could occur in January. Currently, the retailer has about 900 stores.
- Guitar Center is the world’s largest retailer of musical instruments. It refinanced its debt mid-year, pushing out the maturity dates to 2021 and 2022. However, the large debt load and ecommerce is causing significant issues. As such, the company with more than 250 locations remains on the watch list.
- Charlotte Russe had significant sales loss of more than $100 million compared to last year (FILED: Click for Update Blog).
- General Nutrition Centers (“GNC”) closed 200 stores in 2018, but that may not be enough to save off a Chapter 11 filing. The company operates more than 3,000 stores nationwide. 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.
- Crew tried in 2018 to rehab itself to 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.
- Payless Part 2? Although Payless completed its bankruptcy proceedings earlier this year, shedding stores and cutting debt, the company still faces the same challenging market conditions that forced it into bankruptcy. With 3,600 stores remaining, don’t be surprised for a second filing this year.
- JC Penney has faced a string of disappointing quarters which has caused much talk of a Chapter 11 filing. Moody’s downgraded the company in August. Although debt does not mature until 2020, like the Toys “R” Us bankruptcy, the retailer cold be forced to file before then as there have been significant vendor concerns, according to SeekingAlpha.
- 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.
- 99 Cent Only is just one of the discount retailers facing 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 year after year always seems to avoid a bankruptcy filing. But recent news of a $51.1 million loss (a more than 500% increase from its loss in 2017) makes this filing almost assured.
- Things Remembered has suffered poor performance at centers and has had difficulty operating in an omnichannel world (FILED Click for Update Blog).
- PetSmart, Inc. faces heavy competition from e-commerce. To circumvent his, it 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.
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 & Retail Development Group can help.
Our bankruptcy attorneys regularly represent owners, developers, and/or landlords 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, 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 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, is an active member of ICSC, and is State Chair for ICSC PA/NJ/DE region.