A massive clothing retailer now files an unexpected bankruptcy, triggering store closures and layoffs nationwide according to a filing.
The parent company of Bob’s Stores and Eastern Mountain Sports, both headquartered in Connecticut, have filed for Chapter 11 bankruptcy bankruptcy.
The 24-page filing came late Tuesday from GoDigital Media Group, which owns both discount apparel-and-footwear retailer Bob’s Stores, and sister brand Eastern Mountain Sports.
Under federal bankruptcy laws, a Chapter 11 filing protects a company from its creditors and allows the business to keep operating while its owners seek to restructure their debt.
The bankruptcy filing came a little less than a month after the Los Angeles-based parent company notified Connecticut officials it planned to lay off 150 employees and close 10 stores across the Northeast.
New Haven Register reports that the company has 369 creditors, according to the filing, as well as assets of between $50 million and $100 million and an equal amount of liabilities
The parent company’s bankruptcy filing lists the 20 largest unsecured creditors of the two chains, with the largest being Carhartt, the work clothing brand, which is owed $1.24 million.
Two other brands that are among the largest unsecured creditors are Baltimore-based Under Armour, which is owed nearly $651,000 and Timberland, which is owned by VF Corp, in Denver, and is owed just under $665,000.
There are 35 Connecticut-based business listed as unsecured creditors, including The United Illuminating Co., several solid waste haulers around the state, the city of Waterbury’s tax office, a Danbury plumbing company and a Meriden lawn care firm. The filing does not list how much those Connecticut creditors are owed.
Company officials were not available on Thursday to provide comment on the bankruptcy filing.
Retail experts say that historically speaking, Chapter 11 bankruptcy filings typically forestall a retailer inevitably going out of business.
“Retailers that file for Chapter 11 typically come back and survive for a while, but it’s never to a robust state,” said David Cadden, a professor emeritus at Quinnipiac University’s School of Business.
When visiting Bob’s Stores website, it is unavailable and ‘under construction’.
“Pardon our mess while we make some planned updates to our website.
We’ll be back soon with an enhanced online shopping experience!
In the meantime, our stores are open and stocked.
Come in for the best deals on the brands you love!,” the website reads.
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Also Read: Another Mall Clothing Retailer Now At High Risk of Bankruptcy
Other Economy News Today
An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.
Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.
Supply Source brands include The Safety Zone and Impact Products.
The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.
Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.
Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products
The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.
However, the company’s financial performance deteriorated in subsequent years.
Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.
The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.
In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.
Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.
The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.
The excess inventory forced the debtor to secure additional storage space, which increased storage costs.
These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.
The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.
The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.
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Also Read: This Massive Mall Retailer Is Now Closing In California
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