Children’s clothing company Gymboree Group Inc will follow several other retailers into Chapter 11, just as Sears decides whether to liquidate its inventory and shutter altogether. It would be the second time in two years that Gymboree will file for Chapter 11.
According to The Wall Street Journal, the company is expected to liquidate all 800 stores under its flagship brand. Two other divisions — Janie and Jack and Crazy 8 — might survive, or they could join Gymboree in liquidation. The Wall Street Journal reports that the current owners of the chains are Carriage House Capital Advisors, Brigade Capital Management and Oppenheimer Funds.
The list of retailers that have chosen Chapter 11 gets longer by the year. Among others that have gone into bankruptcy and often liquidation are Circuit City, KB Toys, Borders, Linens ‘N Things and Sports Authority. L Brands Inc. (NYSE: LB) recently close all of its Henri Bendel stores, a total of 23, and also shut down its online business. Radio Shack, once one of the largest retailers in the country based on store count, went bankrupt a year ago.
The move toward Chapter 11 and liquidation is so pervasive that in December 2017, credit research firm S&P listed 15 companies in the industry that might declare bankruptcy or close entirely. These included Bon-Ton, J. Crew, PetSmart and David’s Bridal. Moody’s did a similar analysis for USA Today in December 2017. It listed 26 retailers and apparel companies, including Neiman Marcus, GNC, Nine West, Toms shoes and Cole Haan. Among almost all lists of the largest retailers that may go under is J.C. Penney Inc. (NYSE: JCP). Its new CEO recently closed three stores and said she would look at the entire portfolio of locations.
Bankruptcies are not the only sign of trouble. Some retailers are slashing the numbers of their stores. Gap Inc. (NYSE: GPS), the owner of Gap, Banana Republic and Old Navy, has shut down hundreds of stores in the past three years.
Retailers close their doors for two primary reasons. The first is debt levels. This was, according to management and retail experts, what happened to Toys “R” Us. The other is that direct competition is too great. J.C. Penney falls into this category as its struggles against Macy’s, Target and Walmart. Every retailer in the country has to deal with e-commerce giant Amazon.com, which has made it hard for retailers to do well online.
Gymboree is the latest retailer to close. It will not be the last.