Retailers Filing for Chapter 11 Bankrutpcy

Posted on Apr 12, 2016 By Kathryn Davis

Attorney Kathryn DavisMany big name retailers have filed Chapter 11 bankruptcies over the last several months.  Among them are names like City Sports, Sports Authority, Quicksilver, and most recently Pacific Sunwear, also known as PacSun.   The news of these filings leaves many people scratching their heads and wondering where these retailers went wrong.

Competition from Online Retailers

One issue facing the sports retailers, City Sports and Sports Authority, is the increased completion from online retailers.  According to Matt Powell, a sports industry analyst with the NPD Group, the underlying sports business remains solid.  “Last year, we had the second best year in a decade in athletic footwear and athletic apparel remains robust…”  Additionally, in contrast with an online retailer, these stores have to rent space.  Sales volumes are often not enough to support rent payments that have not come down much, if at all, since the online shopping boom.

PacSun and Quicksilver both historically cater to the surfer/skater teen group.  PacSun has been repositioning itself as more of a street wear retailer in recent years, launching collaborations with Kanye West and Kylie and Kendall Jenner.  The change in focus could have come too late in the game, or it might have proved too difficult to pull off.

Malls Seeing Decrease in Traffic

A common denominator in most of these retailers is that the shops are located in brick and mortar stores-mostly malls.  Malls have generally seen a decrease in traffic in recent years, thanks to the online shopping industry.   Last year U.S. News reported foot traffic for retailers in the months of November and December fell from 35 billion visits in 2010 to 17.3 billion visits in 2013.   In addition to competition from online retailers, “dollar stores” and discounter retailers such as T.J. Maxx have attracted many traditional mall shoppers looking for deals.

These retailers all plan to restructure their debts through bankruptcy and continue selling their inventory to customers.  However, the problems that face these retailers and more are not going anywhere.  If you have been affected by a retailer’s closing or restructuring, or if you just need to discuss your personal financial situation, please call our office location most convenient to you and set up a free consultation with one of our experienced attorneys.