Retail chains tend to sputter out of existence.
In many cases, a retailer may struggle and even file Chapter 11 bankruptcy, but that's not the end. In most cases, Chapter 11 gives a company time (and usually funding) to try to right the ship. At the least it may cover a wind-down period during which a white knight might step in to purchase the brand.
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The reality is that a company that reaches Chapter 11 makes a solid comeback. Retail brands occasionally survive bankruptcy, but in most cases they're just finding someone else willing to pay for a stay of execution.
Sports Authority, Linens 'n Things, and Circuit City all had a second life beyond their first bankruptcy filing. None of those brand names exist in their original fashion now. It's not unheard of outside retail -- Marvel, Hostess, Delta Air Lines, and Converse all operate after bankruptcy filings -- but for stores it's nearly unheard of.
Banks and lenders may have learned this lesson, especially these days when money is more expensive. In recent months, we saw Bed Bath & Beyond not only go bankrupt but liquidate fairly quickly.
Now, a brand once owned by BBBY -- Christmas Tree Shops -- might not be finding its own Christmas miracle.
Image source: TheStreet
Christmas Tree Shops Has a Cult Following
While Bed Bath & Beyond sold off Christmas Tree Shops three years ago, the newly independent brand was clearly focused: a home-decor, furniture, and discount gift retailer (it did not specialize in Christmas goods) operating on the treasure-hunt model.
That's been a popular driver for brands that arguably have a cult following. TJX Cos.' (TJX) Marshalls, Home Goods and TJ Maxx divisions all use that model. as does Ollie's Bargain Outlet (OLLI), which has a devoted fanbase dubbed "Ollie's Army."
When Christmas Tree Shops filed Chapter 11 in May, its devoted fanbase seemed likely to make the company worth saving. When it filed, the once-seasonal but now general merchandise chain had sought permission to close 10 stores.
That would leave it with 72 locations concentrated in the Northeast, and the company sounded hopeful, in a statement it made to RetailDive.
“Based on public filings, the bankruptcy case is a true ‘balance sheet restructuring’ with a senior debt resolution and an opportunity to shed isolated non-performing locations,” Derek Baker, a partner at the Reed Smith law firm, told Retail Dive.
“The company reports that it will continue to operate its more than 70 locations with ‘business as usual’ and is using the bankruptcy case merely to right size [its] balance sheet and to eliminate certain burdensome leases and debt.”
Now, that does not appear to be the case, and liquidation may be imminent.
Christmas Tree Shops Needs a Buyer
Efforts to restructure debt have failed and the company has filed a court document saying that it will liquidate all its remaining stores if it cannot find a buyer.
Christmas Tree Shops has defaulted on its $45 million bankruptcy loan, according to a second RetailDive story.
The company’s lenders said they would provide limited financing if Christmas Tree Shops was able to enter into an asset-purchase agreement by Wednesday and secure a $5 million deposit by July 6.
A sale process is ongoing, but the company does not believe any interested parties will be able to meet that deadline, the website reported.
That makes a liquidation of the beloved brand strongly likely.
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