The Fates of 21 Retailers Who Filed Chapter 11
Consumers' tastes are always changing -- and for those retailers that can't keep up, empty storefronts often follow.
Some of the most recent retail bankruptcies have been rooted among the teen set, whose businesses were crushed at the expense of fast-fashion's growth. General merchandise stores Wal-Mart and Target have wiped out a number of other companies, who were unable to compete with their pricing power and general reach. That problem only increased when Amazon.com arrived on the scene.
Just because a retailer is down, however, doesn't mean they're out. A number of the companies on this list emerged from bankruptcy, proving that in today's world of online shopping, many struggling brands are granted a second chance at life.
Here's a list of some retailers that did -- and a few who did not -- bounce back from bankruptcy filings.
PacSun is the latest teen retailer to fall victim to fickle tastes. The California brand, known for its surf styles, announced in April that it had entered into a restructuring agreement with affiliates of Golden Gate Capital, saying it would implement its reoganization plan through Chapter 11.
Gary Schoenfeld, president and CEO of PacSun, said the company intends to solve two major issues that it could not fix on its own: Its "very high" occupancy cost of $140 million a year, and $90 million in long-term debt coming due later this year.
"The bankruptcy process gives us the ability both to fix our balance sheet by reducing our long-term debt by more than 65 percent, and reduce our annual occupancy costs, either through landlord negotiations or lease rejections," Schoenfeld said.
An ongoing battle with founder Dov Charney and a steady erosion of sales proved too much for American Apparel, which filed for Chapter 11 reorganization in October.
The move came less than two weeks after the retailer received a notice from the New York Stock Exchange, which said its was no longer in compliance with listing requirements due to its weak financials.
CEO Paula Schneider, who has been attempting to turn around the company by eliminating its raunchy ads, cutting costs and updating its merchandise, said, "This restructuring will enable American Apparel to become a stronger, more vibrant company."
American Apparel emerged from Chapter 11 as a private company in February. At that time, the retailer said its reorganization plan converted roughly $230 million of bonds into equity in the company, and provided $40 million of exit capital and a commitment for a $40 million asset-backed loan.
Once known as the go-to destination for do-it-yourself electronics, RadioShack filed for Chapter 11 bankruptcy protection in February 2015, after nearly a century in business. The niche retailer struggled to stay relevant as electronics became more mainstream -- sending shoppers to more innovative competitors such as Amazon and Apple -- and as consumer preferences shifted toward mobile devices.
RadioShack tried to revamp its image in 2009 by rebranding its stores as "The Shack," but consumers didn't bite. Other attempts to refresh the brand also fell flat. In 2014, it ran a high-profile ad during the Super Bowl, which featured popular '80s figures such as Hulk Hogan.
Last year, the retailer announced a deal with Sprint, which acquired more than 1,000 of its locations. RadioShack's nameplate lives on at these locations through co-branded shops, and via franchise stores.
Less than 10 days after Wet Seal announced that it would close about two-thirds of its stores, the teen retailer filed for Chapter 11 bankruptcy protection.
"After careful consideration, the board of directors unanimously concluded that filing for Chapter 11 was the appropriate course of action for the company," former CEO Ed Thomas said at the time.
In April 2015, Versa Capital announced that one of its affiliates had completed its acquisition of the teen retailer, which was expected to be sold to B. Riley Financial. In August, board member Melanie Cox succeeded Thomas as CEO.
"I'm looking forward to continuing Wet Seal's renewal under Versa's ownership," Cox said.
Discount retailer Deb Shops didn't fare as well as Wet Seal. After filing Chapter 11 in December 2014, a bankruptcy judge in Delaware ruled that the company could liquidate, and shut down its nearly 300 stores in the process. It now operates as an online-only, plus-size retailer.
Deb Shops also filed Chapter 11 back in 2011.
Like Deb Shops, teen retailer Delia's also bit the bullet and filed for Chapter 11 before the calendar turned on 2015, saying it too would close all of its stores and liquidate.
Perhaps best known for its flirty catalogs, the retailer had initially been exploring strategic alternatives to raise financing or engage in a sale or merger.
Less than a year later, Delia's was relaunched as an online-only brand by Steve Russo, founder and CEO of FAB Starpoint.
Six decades after opening its first store in Richmond, Virginia, Circuit City turned off the lights.
The electronics retailer had thwarted off unsolicited buyout offers, and then considered a deal with Blockbuster, before ultimately falling under the weight of slowing consumer spending on electronics and its shriveling market share, to file for Chapter 11 bankruptcy in November 2008.
At the time of the filing, Circuit City had more than 700 stores in 55 markets. By early 2009, the company liquidated $3.4 billion in assets and closed its doors for the last time.
Now under new ownership, the electronics chain is preparing for a relaunch online, at owned retail shops and through franchise locations.
Once a top-of-mind retailer for computing-related purchases, CompUSA lost its hold on the market and was forced to wind down its retail operation in late 2007.
At the time, the retailer was owned by a Mexican holding company, U.S. Commercial Corp., which was majority-owned by Carlos Slim, Latin America's wealthiest man. Slim plowed about $2 billion into the ailing computing retailer, but it wasn't enough to combat competition from big-box rivals Best Buy and Wal-Mart Stores.
Restructuring firm Gordon Brothers Group bought the chain's assets and shuttered its remaining 103 stores.
The brand was briefly revived when Systemax purchased it in 2008, and operated it as an online and catalog business until 2012, when the CompUSA brand was dropped and consolidated under Systemax's TigerDirect brand and website.
Streaming killed the video star.
Blockbuster Video had a relatively quick ascent to dominance, and an equally quick fall. The video rental chain went public in 1986, just a year after its founding, and by 2002 had a market value of $5 billion.
Between 2003 and 2005 the video rental chain lost nearly three-quarters of its market share, according to Yahoo Finance calculations. Analysts attributed the chain's downfall to competitors that didn't charge late fees, such as Netflix and Redbox.
Activist investor Carl Icahn waged a successful proxy battle in 2005 but was never successful in his push to save the company.
Blockbuster filed for Chapter 11 bankruptcy in September 2010.
DISH Network bought Blockbuster for $320 million in bankruptcy auction proceedings, eventually closing all remaining locations. It still offers Blockbuster@Home streaming services for subscribers.
Though Macy's has recently struggled to grow sales at its department stores, it's nothing like what the retailer faced back in the '90s. In 1992, Macy's filed for Chapter 11 bankruptcy protection, after being weighed down by debt from the leveraged buyout that took it private and acquisition costs. It was dealt another blow during the 1980s recession.
In 1994, it was acquired by Federated Department Stores (the present-day Macy's), which itself had emerged from Chapter 11 in 1992.
The nation's second-largest book seller by store count waved the white flag in 2011, 40 years after its first store opened in Ann Arbor, Michigan.
Borders was late to embrace the online shift and failed in its diversification efforts into toys and games.
In 2000, the retailer hired Merrill Lynch to help explore strategic options from recapitalization to leveraged buyouts or mergers, ultimately striking a deal with Amazon.com—the company that largely contributed to the store's demise. Through the deal, Amazon managed the online sales for Borders.
Despite activist investor Bill Ackman's attempts at a merger with also-faltering rival Barnes & Noble, the book retailer filed for Chapter 11 bankruptcy protection in February 2011 and eventually closed all 640 stores.
Tower Records was an icon for music lovers who flocked to its extensive collection of music and music magazines. But 46 years after opening the first location in Sacramento, California, the music retailer closed its U.S. stores in 2006.
Experts point to a number of factors for Tower Records' demise. Big-box stores began to sell CDs for less, and CD sales slowed as digital music offerings such as Napster became mainstream.
Tower Records' parent company MTS Inc. began a debt restructuring of Tower Records in 2003 and filed for Chapter 11 bankruptcy in 2004.
Tower Records closed its remaining 89 locations in 2006, after a second bankruptcy filing, but still lives online.
The Chapter 11 filing came three years after private equity firm Prentice Capital Management bought it out of bankruptcy. While KB Toys was the leading mall-based toy retailer with $480 million in sales when it filed for Chapter 11, it only represented a small percentage of the overall U.S. toy market, which racked up $21.64 billion in sales in 2008, according to The NPD Group.
Larger competitors with better pricing power, such as Wal-Mart, Target and Amazon, made it hard for KB to compete. According to the bankruptcy filing, KB Toys owed between $100 and $500 million to creditors, and had total assets in the same range. In August 2009, competitor Toys R Us acquired the KB Toys brand, trademarks and intellectual property rights.
Years of sluggish sales and a public controversy over its Ionic Breeze air purifiers were the nail in the coffin for The Sharper Image.
But lovers of all things quirky can rejoice. Although the company filed Chapter 11 in 2008, it was relaunched online in 2010. Iconix Brand Group owns rights to the brand.
Eddie Bauer has taken more than one trip to bankruptcy court, with its most recent Chapter 11 filing coming in 2009. The company's then-CEO Neil Fiske said it was struggling under a "crushing" debt burden, which he said was put in place during its prior reorganization efforts. He also blamed the recession.
Golden Gate Capital acquired the brand for $286 million in 2009. Eddie Bauer is now sold at its own stores, at wholesale and online.
After years of struggling, the financial crisis put the final nail in Mervyn's coffin.
Undifferentiated merchandise, heightened competition and waning consumer spending led to the department store's loss of relevancy, and it started to lose market share to Target (previously Dayton Hudson Corp), its former parent company. Four years before it would eventually close for good, Target spun-off Mervyn's to a group of private equity investors, led by Sun Capital Partners.
The department store first filed for Chapter 11 bankruptcy in July 2008; by October, the 59-year-old retailer announced plans to liquidate and close of its remaining stores, just in time for the holiday season.
In 1997, one of the oldest five-and-dime retailers sold its last pair of socks and milkshakes in its namesake stores.
The 117-year-old company couldn't stand up to competitors such as Wal-Mart and Target, which offered larger selections, speedier checkouts and lower prices. The discount retailer did its best to expand into malls as Americans moved to the suburbs in the 1950s, but eventually the big-box retailers innovated faster, and desire for lunch counters while shopping waned.
While the Woolworth Corporation continued to operate its other brands, including Foot Locker, Northern Reflections and After Thoughts, its remaining 400 discount stores, responsible for $1 billion of the company's total $8 billion in sales, closed across the country. The parent company changed its name to Venator Group before morphing into athletic retailer Foot Locker in 2001.
Linens 'n Things
Linens 'n Things went from $2.8 billion in sales to bankruptcy. Founded in 1975 and taken private by Apollo Management in 2006, the retailer filed for Chapter 11 bankruptcy two years later, eventually shuttering its 589 stores and selling off assets from inventory to intellectual property.
Then-CEO Robert DiNicola blamed the fall of the housing, mortgage and credit markets, as well as the decline in consumer spending, for his company's downfall — though Linens 'n Things was also crumbling under a mountain of debt after its leveraged buyout. But the home goods retailer later found new life as an online-only retailer.
Bombay Company was an early casualty of the housing market crash, though perhaps it wasn't so obvious at the time. Revenue at the British-inspired home decor retailer began slipping in double-digit rates.
Bombay Company filed for bankruptcy in fall 2007 and its inventory, and later its intellectual property, was purchased by Gordon Brothers Retail Partners and Hilco Merchant Resources. By early 2008 all U.S. retail stores were closed.
Today, Hermes-Otto International owns the brand and sells merchandise directly to consumers through bombaycompany.com and through select retailers.
Loehmann's, Filene's Basement, Daffy's
The financial crisis may have weeded out a number of discount retailers, but in the six years since 2008, many of these names have shifted online.
Off-price retailers Filene's Basement, Loehmann's and Daffy's went of business between 2011 and 2014, much to the dismay of nostalgic bargain-hunting fashionistas. Filene's Basement was the country's oldest discount retailer when it locked its doors at the end of 2011. The retailer famous for its "Running of the Brides" annual bridal gown event, closed all of its Filene's Basement and Syms stores by early 2012. Filene's Basement has since relaunched as an online-only store.
Not long after Filene's disappeared, 51-year-old Daffy's closed the doors on its 19 East Coast locations in 2012. Daffy's wasn't able to keep up with fast-fashion competitors such as Zara and Forever 21 or flash sale sites such as Gilt Groupe and Ideeli.
Loehmann's started in New York City in 1921 and filed for bankruptcy a third time in 2013. The brand still operates online.
Coldwater Creek filed for bankruptcy in 2014. While the 30-year-old specialty retailer tried to reinvent itself, it never came to fruition.
Not having earned an annual profit after 2007, Coldwater Creek filed for Chapter 11 and liquidated its inventory and assets. CEO Jill Dean cited the company's declining liquidity position and challenging retail environment for the "disappointing" decision to liquidate. According to the bankruptcy filing, Coldwater Creek listed assets worth $278.5 million and debts of $361.3 million.
The company's intellectual property, now owned by Sycamore Partners, has since returned to its roots, selling women's apparel through catalogs and online.