20 Retailers to Watch for a Bankruptcy Filing in the First Half of 2021

The global pandemic has upended retail across the country. In most cases landlords and tenants are working together to get through this adversity. Although vaccines are expected before the end of the year, the distribution will not likely be available to everyone until at least mid-2021. As such, the retail industry is expected to have a tough slog through at least the first part of the year.

Following is our top retailers to watch for possible Chapter 11 filing(s) in the year ahead.

1. AMC – When Was the last Time You Went to the Movies? According to the 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, the question is how long after the first of the year will the infusion get the chain?
2. 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.
3. Francesca’s – An Imminent Filing? According to the Business Insider, a recent filing with the SEC stated that the company may “seek a restructuring under the protection of applicable bankruptcy laws” if it’s unable to “raise sufficient additional capital.” Although the company had 700 locations at the end of the second quarter, it is now closing roughly 20% (140 stores) by the end of this year. A bankruptcy seems inevitable.
4. 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?
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. L Brands – Jettisoning Victoria’s Secret and Keeping Bath & Body Works? – The Motely Fool reports that the operator of Victoria’s Secret and Bath & Body Works have a mixed bag during the pandemic. Although the company adjusted its credit line, cut expenses, and suspended dividend payments to save money, has also closed at least 250 Victoria’s Secret stores. Yet, Bath & Body Works increased total sales by 13% in the second quarter, fueled by e-commerce. With over 1,100 Victoria’s Secret stores worldwide and 1,700 Bath & Body Works stores, it may behoove the company to file and sell off the Victoria’s Secret side of the house.
11. The Children’s Place – Losses keep Piling Up. In June, the largest children’s apparel retailer announced that it would shutter more than 300 stores. Despite buying its largest rival Gymboree, the company may not be able to avoid a Chapter 11 filing. According to 24/7WallSt.com, the company reported a second quarter net loss of $46.6 million. Unless online sales can offset in-store losses, the company appears on the verge of filing.
12. Pet Valu – Recession-Proof Business Goes Out of Business. According to Shopping Center Business, Pet Valu announced a wind-down of its operations due to COVID-19. The company’s 358 stores and warehouses are set to close by the end of the wind-down process. However, wind-downs are usually contingent upon concessions from landlords. We will see if the company can keep landlords at bay long enough to get through the process without having to resort to bankruptcy protection.
13. Build-A-Bear Workshop – Can the Holiday’s Save Teddy? Expect the toy store to hold off filing until January 2021, to capture the holiday toy rush. According to Seeking Alpha, the company has been fighting against the demise of the mall for years. When COVID-19 occurred, all 400 stores were shut down. How a mall-based retailer that depends on children coming into its stores to sit and build their product can survive in a pandemic is a mystery.
14. 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?
15. 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.
16. Mattress Firm – Still Too Many Stores? USA Today reports that bedding-related products are hot sellers – enjoying a year-over-year sales increase of more than 30%. This fact, combined with the company’s successful emergence a few years ago from Chapter 11 protection should keep them off the list. The problem is that many think that the company did not reduce enough footprint. Adding the success of “bed in a box” retailers in recent years, places the company squarely in line for a Chapter 22 (a second Chapter 11 filing) to reduce its store count to remain competitive.
17. Christopher and Banks –Tough Time for Women’s Apparel. According to Forbes, the 448 store, Minnesota-based company founded in 1956 has suffered significant damage, as its cash balanced dropped from $3.2 million to $183 thousand in just three months. Although the $10 million received from the PPP (Paycheck Protection Program) kept the company alive, it is doing everything it can to cut costs. The company recently hired a real estate consulting firm to assist in lease re-structuring.
18. Chicos – Company Hopes Its Credit Facility Stave Off a Filing. According to WWD, the company’s third quarter loss of $46.8 million, as well as the Canadian arm’s bankruptcy filing in August, may not be enough to place it into bankruptcy. The company recently reported that it acquired $300 million senior secured credit facility with Wells Fargo & Company maturing on October 30, 2025. Still, with appeal suffering, it would not be a surprise if the company were to file.
19. Destination XL – Destination Chapter 11. According to Retail Brew, the Massachusetts’s based company’s reopening strategy is focused on one-on-on service. However, that is the type of service that is not doing well in the pandemic. Further, the company appears on S&P’s list of most vulnerable retailers for a bankruptcy filing. Despite the company’s corner on the big and tall market, retail apparel is facing huge difficulties in the COVID-era.
20. 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?

If you are an owner, developer, and/or landlord, it is important to know and understand how these changes will affect your shopping center. Stark & Stark’s Shopping Center and Retail Development Group can help. Our attorneys regularly represent owner, developer and/or landlord throughout the country, in leasing, buying/selling, 1031 Exchanges, refinancing, as well an enforcement activities. One of our specialties is bankruptcy representation for owners, developers and/or landlords, nationally.

Currently, our team is providing value-added services to landlords in a number of Chapter 11 cases including: GNC, Stage Stores, Modell’s, 24 Hour Fitness, Sears, Guitar Centers, NPC, Toys R Us, Charming Charlie Part 2, and A&P.

For more information on how Stark & Stark’s Shopping Center Group can assist you, please contact Thomas Onder, Shareholder at (609) 219-7458 or tonder@Stark-Stark.com, as well as Joseph Lemkin at (609) 791-7022 or jlemkin@stark-stark.com. Messrs. Onder and Lemkin write regularly on commercial real estate issues and are both active members of ICSC. Mr. Onder is State Chair for ICSC PA/NJ/DE region.