Update: June 10, 2019: A federal judge in Nebraska confirmed Shopko's Chapter 11 bankruptcy plan that provides for the wind down of the company and distributing the proceeds of the retailer's liquidation sales. Judge Thomas Saladino said a revised plan resolved legal issues with respect to releasing Shopko executives from liability, though pharmaceutical-maker McKesson had objected to the revised plan, according to an audio recording of the hearing.
UPDATE: May 30, 2019: A federal bankruptcy judge on Wednesday denied Shopko's plan to liquidate in bankruptcy and distribute the proceeds among creditors. The judge, Thomas Saladino, specifically took aim at liability releases in the plan for company insiders that would protect them from legal action by creditors, according to an audio recording of a court hearing. "I don't know where this case goes from here," Saladino said. "We'll figure that out I guess as time goes on." Objecting to the plan was pharmaceutical-maker McKesson, a major supplier to Shopko that says it was owed nearly $70 million when the retailer filed for bankruptcy. An attorney for McKesson said Wednesday at trial that the company has what it believes is a fraud claim against Shopko executives under Wisconsin law.
Shopko on Monday announced its plans to liquidate, citing its inability to find a buyer as the reasoning behind the decision, according to a company press release.
The retailer is still in the process of evaluating what it will do with its Shopko eyecare center operations, per the release.
Gordon Brothers will oversee the liquidation process, which should conclude in 10 to 12 weeks. Shopko did not immediately respond to Retail Dive's request for comment.
A buyer never materialized to save struggling retailer Shopko.
In early February, it was Shopko's plan to continue operating physical locations as it restructured, albeit with fewer stores. "Through our conversations with potential buyers, it has become clear that it is in our best interest to operate with a significantly smaller store footprint," a company spokesperson said at the time in a statement to Retail Dive.
Yet, court documents on Monday revealed that those hopes have been squashed. Shopko announced that it will be closing an additional 120 stores in locations in Idaho, Illinois, Iowa, Michigan, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wisconsin and Wyoming. Those stores are shuttering in addition to the approximately 250 locations that were announced at the end of 2018 and the start of 2019.
"Liquidation was inevitable because of the incredible pressure caused by Walmart and Target on a retail level in the smaller city locations (less than 50,000 residents) where Shopko stores were located," Eric Snyder, partner at New York City-based law firm Wilk Auslander, said in comments emailed to Retail Dive.
Shopko's optical brand is still theoretically in-play, even as the rest of its portfolio prepares for liquidation. In its initial Chapter 11 filing, the retailer planned on relocating over 20 of its Optical Centers to freestanding spaces and growing that part of the business by opening additional optical stores in 2019.
Synder doesn't see much of a future with pursuing this plan, specifically due to online competition. "[T]he public is becoming increasingly more comfortable buying glasses on the Internet and on-line optical sites, such as Zenni, Glasses USA and Warby-Parker continue to generate substantial revenue. [I]n the end, I am not sure there will be much value in the optical locations that will benefit creditors," he stated.
Shopko, which is owned by private equity firm Sun Capital, originally declared bankruptcy due to "excess debt and ongoing competitive pressures," according to a statement by the company in January.
"This is not the outcome that we had hoped for when we started our restructuring efforts," said Shopko CEO Russ Steinhorst in a statement.
This article has been updated with additional details from Shopko's Chapter 11 plan confirmation trial.