The once-popular children’s clothing chain, Gymboree, filed for Chapter 11 Bankruptcy this month in an attempt to lessen its debts. Representatives of the company shared that the retailer wishes to remain in business but will close up to 450 of its nearly 1,300 stores.
The company’s goal is for a complete reorganization.
This bankruptcy did not come as a surprise, as in recent months, Gymboree refused to pay a good number of its bills to creditors. What, exactly, does the company owe?
A Mountain of Debt Leads to Bankruptcy
According to court documents, the company reported a total of $1.4 billion worth of debt. Gymboree hopes to cut that debt by $1 billion, but must still win approval of its course-of-action by late September.
The company’s CEO, Daniel Griesemer, recently released in a statement, “We expect to move through this process quickly and emerge as a stronger organization that is better positioned in today’s evolving retail landscape, with the right size store footprint and greater financial flexibility to invest in Gymboree’s long-term growth.”
Similarly to other retailers such as True Religion, The Limited, and PayLess Shoes, Gymboree sales have been quickly dropping over the past decade due to declining mall traffic, high rental space costs, and—perhaps the biggest culprit—online competition.
The Digital Era Spells Trouble for Retailers
Consumers have been moving ever-so-swiftly from brick and mortar establishments to mega online retailers such as Amazon.com and other retailers that do a much better job of maintaining and growing a contemporary, online presence.
Chief Restructuring Officer, James, Mesterharm, reported in a court filing that Gymboree’s web systems are “dated and unsupported.” To say the least.
Mesterharm also reported that Gymboree had been struggling against “other established brick-and-mortar retailers,” such as Children’s Place and GapKids. Unfortunately, Gymboree failed to innovate as the times called for. Fortunately, filing for Chapter 11 Bankruptcy could give Gymboree a chance to forge a new path forward. Company representatives shared that Gymboree does, indeed, have a secured deal with lenders to restructure its debts.
Gymboree was founded in San Francisco in 1976, but it was not yet a clothing company. It was founded as a program which nurtured childhood learning in a unique way that involved playtime with caregivers. It wasn’t until the mid-1980s that Gymboree opened its first store.
The Gymboree brand also contains the brands Crazy 8 and Janie and Jack.