Retail’s constant chase for growth means that some or even most will never reach their goals. And the circle of merchant life often means that, when growth is no longer attainable, there’s the ever-present vacuum of Chapter 11 proceedings clearing the detritus out of the market. Few are inevitably spared the fate in the long run.
But for every rule, there is an equal and opposite exception, which makes this week’s Chapter 11 Watch a first.
Bankruptcy
Normally, the week’s headlines are filled with merchants stuck in a death spiral of slow sales and lackluster supply chain management. What good news there is usually comes from the top-performing retailers of the day, which makes what PacSun has accomplished a downmarket rarity.
Despite originally filing for bankruptcy back in April, surf chic apparel retailer PacSun has now filed documents canceling the expected sale of its assets. The Orange County Register is reporting that Golden Gate Capital (GGC) will assume 100 percent control of the company pending approval, though, with in-store costs upwards of $140 million annually, GGC will clearly still be looking at restructuring.
“Through this restructuring … we plan to solve the two structural issues that, operationally, we could not fix on our own,” Gary Schoenfeld, CEO of PacSun, said in a statement back in April. “First is a very high occupancy cost of approximately $140 million per year, and second is nearly $90 million of 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, appropriately adjusting the fixed costs of operating our stores to better match the shifting retail landscape.”
It would seem like at least some of PacSun’s 593 stores are on the chopping block, especially as other apparel retailers struggle to keep pace with the fast-fashion upstarts that got PacSun into this mess in the first place. Regardless, it’s a step in the right direction for an apparel category and retail industry that’s seen so much of the opposite lately.
Store Closures
Speaking of destabilizing fast-fashion brands, Uniqlo has been one of the few that’s created a global empire out of its threadbare offerings. However, what comes up must go down, and reports are starting to surface that everything might not be rosy in the world of reasonably priced T-shirts.
Uniqlo had closed five U.S.-based stores since January, and according to an interview by Uniqlo spokesman Aldo Liguori in the New York Post, the moves are part of a larger strategy to move away from suburban locations and their smaller footprints in favor of the larger flagship designs it can justify in densely populated cities. The stores that have closed have all been open for less than three years, and to a store front, they were all located in suburban commercial properties in New Jersey, Connecticut, New Jersey, New York and Pennsylvania.
“The U.S. is very important to the company,” Liguori said. “We are focusing on large cities where we can open large stores.”
Layoffs
When Walmart starts throwing around the word “layoffs,” it’s usually front-of-house employees that need to be worried. However, a new cost-saving measure from the retail giant is bidding farewell to hundreds of workers that most consumers never even see.
Walmart is officially parting ways with 500 back-office accounting and cash-counting workers who used to help verify in-store balances onsite. The retail giant has procured methods to accomplish the same task that Walmart EVP of Central Operations Mark Ibbotson described as a “cash recycler” machine.
“We really want to pull our workforce onto the floor,” Ibbotson told MarketWatch.
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