The Retail Industry’s Casualty Report: Gymboree Files for Bankruptcy

According to a recent CNN Money report, another giant retailer is struggling to keep its head above water. Gymboree, a children’s clothing retailer, recently filed for bankruptcy under Chapter 11 to restructure and attempt to stay in business. While the retailer is not at death’s door quite yet, Moody’s, a credit rating firm, recently included Gymboree in a list of 19 retailers facing “financial distress”. Seeking relief under Chapter 11 shows the company has been struggling for some time. According to the report, Gymboree reported a $324 million net loss for the three-month period that ended in January of this year. Not long after that report, Gymboree’s CEO Mark Breadboard stepped down.

All Hope is Not Lost

Gymboree’s recent filings suggest that while it may close hundreds of its stores to free up capital, the company is arranging to borrow an additional $35 million to keep up its operations. No one knows if Gymboree will ultimately follow the path of other major retailers and eventually close altogether (Gander Mountain, HH Greg, Wet Seal, and The Limited just to name a few), but the company is not alone in facing the consequences of increased online shopping.

How does this affect you as a consumer? Well, if you are a fan of traditional shopping malls and retail outlets, you may want to start getting more comfortable with making your purchases online. In a free market economy, companies come and go based on a lot of things. And just as companies face difficult times, individuals also face financial hardships. My colleague, Ed Woods, recently noted the similarities of financial crisis faced by both companies and individuals.:

"While Chapter 11 is frequently used by businesses to restructure their financial affairs and stay afloat, Chapter 13 can be utilized by individuals to accomplish the same goals. Chapter 11 allows businesses, in many instances, to pay what they can while continuing in business. It also offers these businesses protection from creditors who might otherwise be able to pressure them so much that they may have no choice but to go out of business. Chapter 13 affords the same protection to individuals while they reorganize and pay what they can afford to pay"

I couldn’t have said it any better. Gymboree is using the benefits of a Chapter 11 to get back to a stable financial position, you can also use benefits of Chapter 13 to help get you back on your feet. If you are feeling overwhelmed by debt, call one of our offices to set up a free consultation with one of our experienced attorneys.