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Two Second 500 retailers file for bankruptcy protection

February 7, 2017 11:55 AM
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The operator of sporting goods retailer Eastern Mountain Sports and footwear and apparel retailer Bob’s Stores has filed for Chapter 11 bankruptcy protection, as has multichannel games retailer Marbles: The Brain Store.

The filing Sunday by Eastern Outfitters LLC comes less than a year since Vestis Retail Group LLC, No. 511 in the Internet Retailer 2016 Second 500 Guide, sought bankruptcy protection in April for the retail operations that include e-commerce sites EMS.com and BobStores.com, and 86 stores in the Northeast. Eastern Outfitters, a holding company under the leadership of Vestis’ former senior management, in July acquired Eastern Mountain Sports and Bob’s Stores assets out of the April bankruptcy. Vestis also previously owned retail chain Sport Chalet, which it shuttered in April after the filing. Vestis was owned by Philadelphia-based private equity firm Versa Capital Management and generated an estimated $27.4 million in web sales in 2015, according to Internet Retailer’s Top500Guide.com.

Eastern Outfitters has been in negotiations with SportsDirect.com Retail Ltd., a U.K.-based retailer that is expected to become a stalking horse bidder, according to documents filed in U.S. Bankruptcy Court in Delaware. Eastern Outfitters lists its assets and liabilities as between $100 million to $500 million. Sports Direct International is No. 48 in the Internet Retailer 2016 Europe 500 with estimated 2015 web sales of $555.2 million, according to Top500Guide.com.

Eastern Outfitters says its vendors have imposed “very restrictive credit terms thereby depressing inventories. Significantly, unit inventories in some categories are down as much as 30% since the prior sale closed” and the company has been unable to meet its sales plan, according to court documents filed Tuesday. Company representatives could not be reached for comment.

In April, Vestis CEO Mark Walsh said in court documents, “The continuing shift in consumer behavior away from traditional brick-and-mortar retailers and toward online-only stores, together with increased competition from big-box and specialty sporting goods retailers, have contributed to an industrywide weakness.” The retailer also cited trouble switching to a new e-commerce platform and unusually warm weather in the northeastern U.S. during the winter of 2015-16 that hurt winter-gear and apparel sales.

Marbles Holdings LLC (No. 869), which operates MarblestheBrainStore.com and more than 30 stores in the U.S., filed for Chapter 11 on Friday and hopes to secure up to $900,000 from in financing to continue operations, at least in the short term for store-closing sales, according to court documents. The retailer’s assets are listed as $1 million to $10 million, with liabilities of $10 million to $50 million. A court hearing scheduled for Wednesday in Chicago. Marbles had an estimated $86 million in online sales in 2015, according to Top500Guide.com. The retailer could not be reached for comment.

Last week, teen apparel retailer Wet Seal (No. 510) file for bankruptcy, just over a year since first filing in January 2015 and becoming acquired by Versa Capital Management. Limited Stores LLC (No. 216) filed in mid-January and then closed its online operations a week later. Other retailers that have filed for bankruptcy recently include:

  • American Apparel Inc. (No. 338), which filed for bankruptcy for the second time in November. Canadian T-shirt and underwear maker Gildan Activewear bought its intellectual property and other assets for $88 million.
  • Choxi.com Inc. (No. 48), whose debtors filed an involuntary Chapter 7 petition in November was converted to a Chapter 11 petition in December.
  • Nasty Gal Inc. (No. 98) filed for Chapter 11 in November. Web-only online fashion merchant Boohoo.com Plc, No. 166 in the Internet Retailer 2016 Europe 500, announced in December it had entered a purchase agreement for Nasty Gal’s intellectual property and customer database for $20 million.
  • Golfsmith International Holdings Inc. (No. 218) filed for Chapter 11 bankruptcy in September. Dick’s Sporting Goods Inc. (No. 62) acquired its assets and intellectual property for $43 million.
  • Aeropostale Inc. (No. 154) filed for Chapter 11 in May and was subsequently acquired in September by a group including mall operators Simon Property Group Inc., General Growth Properties Inc., and licensing firm Authentic Brands Group for $243 million.
  • Sports Authority (No. 287) filed for Chapter 11 in March. Its name and intellectual property were acquired in June by Dick’s Sporting Goods for $15 million. 
 

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