Retail Chapter 11 Filings Up, Bucking Bankruptcy Trends In Economic Recovery

Greenberg Glusker LLP

The economy is humming along and bankruptcy filings are at historic lows.   Nevertheless, a recent trend in retail may suggest that the times, they are a changing.

Radio Shack, the 95 year old national chain that for many years was the “go to” store for consumer electronics, has been in the headlines as a result of its bankruptcy filing in February.   But getting much less national mainstream publicity was the demise of at least seven clothing retailers, all of whom went out of business or filed Chapter 11 within the past 5 months.   In December it was Deb Shops and Delia’s.   In January, it was Body Central and Wet Seal.  In February, Cache filed, and in April, it was Fresh Produce, Simply Fashion and Frederick’s of Hollywood.

In total, these retailers operated out of over 6,500 stores.   That means many employees are now out of a job.   It also means that there were over 6,500 leases that either were forfeited back to the landlords or sold.  That is a significant disruption for property owners in such a short time period.   And a lot of new business for companies such as liquidators Hilco, Gordon Brothers, and others who specialize in liquidation sales for retail companies that are going out of business, not to mention the bankruptcy lawyers involved in those Chapter 11 cases.

As the economy turns more and more towards e-commerce, it seems reasonable to assume that there will continue to be retail turmoil until a new equilibrium has been reached.  There will always be stores and malls; but more and more consumer spending will be through apps, websites, and other electronic ways of doing business that have not even been invented yet.  So while the total filings are still down, there is reason to think it won’t last much longer. Stay tuned here for future discussion about trends in the economy and how they may affect your business.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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