When it comes to bankruptcy, for some distressed retailers, once is not enough.
Over the past three or so years, a bevy of fashion firms have made their way to bankruptcy court after grappling with hefty debt loads, digital disruption and their own failures to evolve to a changing retail landscape.
Sports Authority, City Sports, Gymboree and Bon-Ton Stores are among the companies that have been shuttered by bankruptcy. Meanwhile, Charlotte Russe, Nine West and Charlotte Olympia are examples of firms that have used Chapter 11 to slash debt, restructure their businesses and emerge stronger.
Generally, the point of corporate bankruptcy, or Chapter 11, is to help a business reduce its debt and carry on — whether it’s through a sale of some or all of its assets to a new company or through a plan that allows it to effectively reorganize and move forward.
However, some retailers have struggled to make the legal process work for them, and they find their names on the bankruptcy court docket for a second — and often, final — time.
Here, three retailers that have filed Chapter 11 two times over.
Payless ShoeSource
After filing Chapter 11 in April 2017 and successfully emerging within four months, Payless had become the poster child for an effective and efficient retail bankruptcy. But the moment was short-lived. The low-price family footwear retailer found itself right back where it started this past February — saddled with too many stores and hundreds of millions in debt — when it filed for bankruptcy again and confirmed it would close all U.S. stores as well as shutter its e-commerce business.
When Payless first staggered into bankruptcy court two years ago, it was laden with nearly $840 million in liabilities — much of which stemmed from a 2012 leveraged buyout by private equity firms Blum Capital and Golden Gate Capital. Via its 2017 court proceedings, Payless was able to shed about $435 million in funded debt and ditch close to 1,000 of its more than 4,000 stores.
Still, a slow digital evolvement, as well as larger structural and operational challenges, left the retailer this year “ill-equipped to survive in today’s retail environment,” according to chief restructuring officer, Stephen Marotta. (Payless continues to operate 420 stores across 20 countries in Latin America as well as in the U.S. Virgin Islands, Guam and Saipan, and at its 370 international franchisee locations in 16 countries across the Middle East, India, Indonesia, Indochina, the Philippines and Africa.)
The Walking Co.
For the second time in 10 years, the California-based footwear chain filed for bankruptcy in March 2018, blaming heightened online competition and the loss of its largest footwear vendor, Ugg parent Deckers Outdoor Corp.
Fortunately for the company, just four months later, it secured an additional $10.2 million in investment from existing shareholders, as well as an exit financing package from Wells Fargo Bank, which together gave it enough support to emerge from the process for a second time. “The reorganization has positioned our company for long-term success,” said CEO Andrew Feshbach at the time. “We are excited to now focus on all of our growth initiatives for The Walking Co. and Abeo footwear brand.”
The Walking Co. is a retailer of comfort footwear and accessories, including Dansko, Ecco and Taos. It operates about 185 stores.
The Houston-based accessories retailer first filed for Chapter 11 protection in December 2017 at the height of digital disruption and the so-called retail apocalypse and exited in April 2018. But its go-forward plan, which included ditching 100 stores, wasn’t enough to keep challenges at bay. Charming Charlie Holdings Inc. filed for bankruptcy again last week, revealing plans to shutter its remaining 261 stores across the country and halt online sales.
The company wrote in court documents that it continued to face “significant headwinds given the continued decline of the brick-and-mortar retail industry.”
“The decision has been made after the implementation of numerous cost-reduction measures and the closure of approximately 100 underperforming stores,” it stated. “These efforts simply were not sufficient to stabilize the [Charming Charlie’s] businesses and ensure long-term profitability.”
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