Children’s apparel retailer Gymboree filed for chapter 11 bankruptcy protection Monday as, like many traditional bricks-and-mortar retailers, it attempts to turn more focus to online shopping channels amid a sea change in consumer spending behaviors.
“We have three great brands, strong operations and dedicated employees, and throughout this process, we will continue to deliver superior service to our customers and put them at the center of all we do,” Gymboree’s President and CEO Daniel Griesemer, who joined the company as chief executive last month, said in a statement.
The San Francisco based company signed a restructuring agreement with a majority of its term loan lenders to reduce Gymboree’s debt load by more than $900 million, much of which stemmed from Bain Capital’s $1.8 billion leveraged buyout of the company seven years ago.
To aid in the process and ensure it will continue to meet its financial commitments throughout the bankruptcy process, Gymboree said it secured $308.5 million in additional financing. In its second quarter results, Gymboree said it had more than $1 billion in outstanding debt, of which $871.9 is due before March of next year.
Sales at two of its brands open at least a year all fell in the most recent quarter with Gymboree and Crazy 8 declining 6%. Same-store sales at Janie and Jack rose 1%, a slower pace of growth than the 11% it notched in the same period a year ago. At the same time, net sales declined 6.4% from the year ago period to $356 million.
Gymboree also said Monday Chief Financial Officer Andrew North would step down from his post for personal reasons, but will remain on with the company for an unspecified period of time as a consultant. Liyuan Woo, director of AlixPartners – the turnaround firm Gymboree hired prior to its bankruptcy filing – will serve as interim CFO as the company searches for a permanent replacement. James Mesterharm, managing director and co-lead of turnaround and restructuring services at AlixPartners, was appointed chief restructuring officer.
Gymboree’s troubles follow a wave of similar circumstance for many mall-based retailers that have fallen on hard times as the shopping-mall era winds down and consumers hunt for bargains online and at off-price retailers like Marshalls and TJMaxx (NYSE:TJX). Once-giants in the industry, including Macy’s (NYSE:M), JCPenney (NYSE:JCP) and Sears (NYSE:SHLD), have been forced to offer more discounts and shrink their physical-store footprints to combat the growing popularity of e-commerce websites.