Gymboree begins winding down operations
Company files for bankruptcy protection for second time
Gymboree has filed for bankruptcy protection for a second time in as many years, but this time the children’s clothing retailer will begin winding down operations for good.
The San Francisco company said that it will close all of its Gymboree and Crazy 8 stores and attempt to sell its Janie and Jack business, intellectual property and online business.
“The company has worked diligently in recent months to explore options for Gymboree Group and its brands, and we are saddened and highly disappointed that we must move ahead with a wind- down of the Gymboree and Crazy 8 businesses,” CEO Shaz Kahng said in a prepared statement.
Gymboree began offering classes for mothers and their children in 1976.
According to its website, the group operates “hundreds” of retail locations in the United States, Canada and Puerto Rico under the Gymboree, Janie and Jack, and Crazy 8 brands.
Gymboree Canada currently operates 49 retail store locations across the country, including Gymboree outlets at the Erin Mills Town Centre in Mississauga and Etobicoke’s Sherway Gardens.
All of the Canadian stores are being shuttered during a wind down process with staff laid off as closures take place, while Gymboree, Gymboree Outlet and Crazy 8 stores and websites will also close soon.
Gymboree has 11,000 full- and parttime employees company-wide, according to court filings, although a company spokesperson did not indicate how many workers are in Canada. A spokesperson for KPMG, the bankruptcy trustee under the Canadian proceedings, did not immediately respond to a request for comment.
An auction of company assets is expected by Feb. 25, according to Bloomberg.
Going-out-of-business sales are being planned to dispose of inventory, raising about $155 million (U.S.) in net proceeds, chief restructuring officer Stephen Coulombe said in court papers. The company expects the sales and store closings will continue through April.
The bankruptcy comes at a time of weakness for the children’s apparel industry, with sales at children’s and infant wear stores in the U.S. falling 5.8 per cent in November and 5.9 per cent in December, according to First Data.
Shares of the Children’s Place Inc., a Secaucus, N.J.-based rival of Gymboree, have dropped 46 per cent since early November. Gymboree was acquired by Bain Capital for about $1.8 billion in 2010. The buyout saddled the company with more than $1 billion in debt, leading Gymboree to cut costs and defer investments before filing for court protection in June 2017. It emerged with less debt and fewer stores.
Competition was still robust from Children’s Place, the Gap, discount stores, internet retailers and big-box retailers that sold clothing at cheaper prices to get shoppers into the store. Margins shrank, and Gymboree’s net retail sales dropped 27 per cent to $573 million during the nine months ended Nov. 3, court documents show.
“The decline in revenue and rise in merchandising costs outpaced Gymboree’s ability to reduce its fixed cost structure composed largely of store rent, labour costs, and corporate general and administrative expense,” court documents show.
Steep declines in mall traffic and the shift online have devastated many traditional retailers. Sears Canada closed the last of its Canadian stores in early 2018, while it averted liquidation in the U.S. when billionaire Eddie Lampert won tentative approval for a $5-billion (U.S.) plan to keep it in business.
The holidays, the most important time of the year in retail, was not nearly as robust as most had expected it to be in the U.S.
Macy’s suffered its worst-ever day of trading after putting up lacklustre holiday numbers, and Kohl’s reported a dramatic slowdown from a year ago. Macy’s is considered a barometer of spending in malls.