Gymboree files bankruptcy for 2nd time in 2 years
Gymboree Group filed for Chapter 11 bankruptcy late Wednesday night, with plans to shutter all of its Gymboree and Crazy 8 stores and operations, according to a company press release. The filing comes a little over a year after the retailer exited its first bankruptcy in 2017.
The children's retailer will be pursuing a going-concern sale of its Janie and Jack business, as well as of the intellectual property and online platform for the Gymboree brand. Special Situations Investing Group will be the stalking horse-bidder for both the Janie and Jack business and Gymboree's remaining assets, with a bid of $85 million, according to court documents.
The children's apparel retailer enters the bankruptcy process with $30 million of debtor-in-possession financing, and was quick to point out that all stores will remain open for the time being as the company works to plan going-out-of-business sales.
After months of rumors, the children's retailer has joined the ranks of others that have filed for bankruptcy twice in a relatively short amount of time — the Chapter 22 club.
Gymboree pointed to competition from The Children's Place and Gap, as well as "indirect competition" from discount stores, big-box retailers and others, which "sell clothing at increasingly cheaper prices." As with others that have filed for bankruptcy recently, Gymboree also blamed its woes on the shift to online and a resulting decline in sales volume at physical locations.
"The combination of declining profitability and general market uncertainty has hampered the Debtors' ability to sustain their funded debt burden and to commit the capital necessary for investing in their operations," Gymboree's Chief Restructuring Officer Stephen Coulombe wrote in the company's first-day declaration. "Poorer-than-expected product sales led to deep in-store merchandise discounting, which in turn led to thinner profit margins."
The closure of Gymboree's Crazy 8 stores was announced in December, as was the fact that the company was considering sales or other transactions for Gymboree and Janie and Jack, and the company's plans for bankruptcy track closely with speculation leading up to the filing. A report from the Wall Street Journal, for example, claimed that the retailer would close the majority of its 900 stores in bankruptcy, aside from some well-performing Janie and Jack stores.
By and large, that seems to be the retailer's plan, and it might not be a bad one considering the challenges the Gymboree branch has faced. That includes from competition from main rival The Children's Place, which began intentionally targeting its customers before August. Janie and Jack, meanwhile, represents 18% of the company's revenue, according to court documents, and newly appointed CEO Shaz Kahng said in a statement that the bankruptcy filing was aimed at preserving the higher-end brand.
"The Company has worked diligently in recent months to explore options for Gymboree Group and its brands, and we are saddened and highly disappointed that we must move ahead with a wind-down of the Gymboree and Crazy 8 businesses," she said. "At the same time, we are focused on using this process to preserve the Janie and Jack business — a strong brand that is poised to grow — by pursuing a sale of the business as a going concern. As we move ahead, we are working to minimize the impact on our employees, customers, vendors and other stakeholders."
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