Posted tagged ‘Chapter 11’

KB Toys Files for Chapter 11 Bankruptcy

December 12, 2008

KB Toys has filed for bankruptcy protection and plans to close its 277 mall-based stores and 114 outlets. In its Chapter 11 filings, the chain blamed “sudden and sharp decline in consumer sales due to macro-economic concerns.”

From the Associated Press:

In another sign of the grim holiday season, KB Toys filed for bankruptcy protection for the second time in four years on Thursday and plans to begin going-out-of business sales at its stores immediately.

The 86-year-old company said in a filing that its debt is “directly attributable to a sudden and sharp decline in consumer sales” because of the poor economy.

That a toy retailer filed for bankruptcy just before Christmas shows how bleak things have become, since such stores make up to half of their sales during the holidays. But analysts expect toy sales this holiday season to be flat or down slightly from last year’s total of $10.4 billion, according to market research firm NPD Group, because consumers are cutting back amid the recession.

In response, toy retailers, including KB Toys, amped up their discounts.

KB Toys had aggressively cut prices to entice cash-strapped shoppers, offering hundreds of toys for $10 or less. It also expanded its value program, which offers deals on new items each week, and offered “Buy 2, Get 1 Free” promotions.

But the deals weren’t enough. In the filing in U.S. Bankruptcy Court in Delaware, KB Toys said that between Oct. 5 and Dec. 8 sales in stores open at least one year, a key retail metric known as same-store sales, fell nearly 20 percent.

The company said it considered its alternatives and decided the most viable way to cover its debt was to begin liquidating its stores via immediate going-out-of-business sales. KB Toys also plans to sell its wholesale distribution business, according to the filing.

Mervyns to Liquidate All Stores This Year

October 21, 2008

Mervyns has decided to go out of business after exploring other options since filing for bankruptcy protection earlier this year. The retailer will liquidate all of its stores during the holiday shopping season to maximize value for creditors. Another victim of the struggling economy!

From the San Diego Union-Tribune:

Troubled department store chain Mervyns, which earlier this year sought to reorganize under Chapter 11 bankruptcy, said yesterday that it has exhausted its options and will go out of business.

Mervyns said yesterday that it explored a possible sale of the company, but determined that holding “going-out-of-business” sales during the holiday season is the best way to maximize value for creditors.

Mervyns said it plans to pursue the liquidation under the Chapter 11 bankruptcy code, a move that typically allows companies to retain more control over the selling of assets.

“We’re disappointed with this outcome, but the company’s declining liquidity position and the extremely challenging retail environment, together with the fact that we have exhausted all other possibilities, requires that we take this action,” Chief Executive John Goodman said in a written statement. “We are confident that the deep discounts available through going-out-of-business sales will drive significant traffic in our stores.”

Mervyns’ announcement marks the latest retail obituary, and it could be a blow to some shopping malls, which are grappling with increasing vacancy rates in a deteriorating economic environment.