The global pandemic has upended retail across the country. In most cases landlords and tenants are working together to get through this adversity.
The National Law Review says some of the top retailers to watch for possible Chapter 11 filing(s) in the year ahead are:
AMC – When Was the last Time You Went to the Movies? According to Variety, the theatre chain with 659 US locations is raising $47.7 million in cash. Although this should avoid a bankruptcy by the end of the year (2020), the question is how long after the first of the year will the infusion get the chain?
LA Fitness – Weathering the Storm to Reduce Footprint? The Wall Street Journal reports that the privately held club obtained a $300 million loan from the government’s Main Street Lending Program to try and weather the coronavirus pandemic. Still, as states and municipalities continue to restrict activities, the gym operations are in flux. How long can the company operate without filing for bankruptcy? The company could follow in the footsteps of Gold’s Gym and 24 Hour Fitness, which both filed earlier this year. If there is a filing, expect it after the first of the year to try and get new members with New Year’s resolutions.
Regal Entertainment Group – Will Moviegoers Return? The Wall Street Journal reports that Regal’s owner, Cineworld Group PLC secured a $450 million loan to stay afloat through at least early 2021. The chain with more than 500 theaters in the U.S. faces, just like AMC, the question of will people return to the movies once a vaccine(s) has been widely distributed?
Bed Bath & Beyond – Can Its On-line Pivot Avoid Bankruptcy? According to USA Today, the New Jersey-based home goods retailer, which also operates buybuy Baby, Harmon Face Values, and World Market, is closing additional stores by the end of 2020. However, StockNews reports that the company’s pivot to focus on e-commerce has generated increased online sales of 80%, posting a profit of $0.50 per share. Still, many think that the company has too many stores. Bankruptcy may be the only way to effectively reduce store count.
GAP – Avoiding Bankruptcy, While Closing its Flagship Store? Retail Dive reports that declines at Banana Republic and Gap’s persist, while Old Navy and Athleta continue to balance the losses. Previously, it announced plans to close more than 200 Gap and Banana Republic stores, with more to come. Although it has used its good credit ratings and relatively little debt to stave off the filing, the question is how long can it endure.
Party City – Social Distancing Celebrations. When was the last time you attended (in-person) a graduations, wedding, birthday, and/or sports celebrations? COVID-19 has basically cancelled Party City’s main drivers. Although the pandemic has exacerbated the company’s woes, Retail Dive reports that the company’s issues began prior to the virus. 2019 sales were 3% below the prior year and with more than half a billion dollars in debt. This, coupled with a helium shortage last year for balloon sales and a poor Halloween could lead to a filing after the first of the year.
GameStop – Too Little Too Late? According to CNN, the company continues to close stores due to little foot traffic – closing 400 to 450 stores by the end of this year of its more than 5,000 stores globally. In addition, the store product mix is more akin to the old “Spenser’s Gifts”, than a video game store. However, the Motely Fool reports two steps in the right direction. The first is the company’s recently redeemed $125 million in senior notes due The second is a deal with Microsoft to obtain a cut of all digital game purchases through gaming consoles that it sells. Although these steps are in the right direction, the company appears that it needs to still reduce footprint, significantly.
Dave & Buster’s – Can the Entertainment Company Get People Back? According to The Dallas Morning News, the company is seeking to borrow $550 million through a five-year secured note offering. Although the company has slowly been opening stores, with shutdowns on the horizon, the company previously warned that it may need to file Chapter 11 to restructure its debt.
Office Depot – A Shift to IT Services. According to CNBC, the U.S. office supply retailer announced plans to cut about 13,100 jobs and close certain retail stores by the end of 2023. However, it plans to focus on its IT services to consumers and business, noting that in three years, the retail arm may only account for 20% of its business. Still, can a brick-and-mortar retailer accomplish such a pivot without a bankruptcy filing?
Barnes and Noble – A Book Store in Amazon Economy. According to Bloomberg, the company wants to be more like an indie-book seller with enhanced offerings of food concessions, stationary, gifts, and games. Yet, can the company weather the pandemic and will its customers return?According to Forbes, it’s on the list of specialty retailers to watch for a Chapter 11 filing.
Burlington Stores – Will an Aggressive Expansion Help it Avoid a Filing? According to CNBC, second quarter sales fell 39% to $1.01 billion. It also swung to a loss during the quarter, as its inventories did not match up with consumer demand. Still the company is on an aggressive expansion, adding 62 new stores, while relocating or closing 26 stores, for a total of 36 net new stores in fiscal 2020 (739 total stores). Can it weather this storm?
It looks like bankruptcy activity will be high in 2021 and many of these matters will end up in court. If you have questions about collections or other matters including landlord/tenant disputes, contract issues and even nuisance ADA claims call in the good guy business litigator Dean Sperling who will resolve YOUR matter with YOUR best interests in mind!
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