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Gymboree is the most recent retail domino to fall

(BUSINESS NEWS) As online shopping popularity increases, mall stores are left struggling to stay in alive and Gymboree has just been added to the endangered stores list.

gymboree

There goes another one!

Before the clothing mill stops, the rumor mill starts.

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Gymboree, the troubled children’s clothing retailer, will be shuttering hundreds of stores across the U.S. as it prepares to seek Chapter 11 bankruptcy court protection. Although the company has made no official announcement, the official filing is expected very soon.

Big losses

The bad news from the retail sector keeps coming. It’s no longer just iconic 90s retailers like Bebe, BCBG, Kenneth Cole, Wet Seal, Limited, or American Apparel that are now biting the dust, it is becoming clear other classic mall occupants would become part of the brutal culling as well. Much of their misfortune comes from the rise of online shopping, and efficient competitors like Amazon.com Inc., and Target Corp.

News of Gymboree bankruptcy filings were already reported last month by the Wall Street Journal and Bloomberg, as the struggling retailer faces a June 1 interest payment on its debt.

Gymboree has not posted a profit since 2011. Its losses total more than $872 million. In the second quarter of Fiscal year 2017 alone, Gymboree had a net loss of $324.9 million.

The exact number of store closures seems to be up in the air.

As recently as July 2016, Gymboree and its branded outlet stores “Janie and Jack” and “Crazy 8” accounted for 1,300 stores, SEC filings show. As many as 350 of them may be shutting down.

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The latest financial report had bad news from every single sector. “The decrease in gross profit quarter-over-quarter was driven primarily by a decrease in comparable store sales (5 per cent decrease) attributable to the Gymboree and Crazy 8 brands, an $11.6 million charge related to excess inventories, incremental distribution costs totaling $2.4 million related to expedited shipping costs during the holiday period, and an increase in promotional (markdown) activities,” the company said.

No where near the black

To narrow its focus on just apparel, Gymboree sold its play-center business last year to a Singaporean investment group for $127.5 million. But it has done little to relieve the company from its massive debts that it incurred from a buyout by Bain Capital for an estimated $1.8 billion. The company has only $9.7 million cash on hand, according to March SEC filings.

From the dire numbers, it is now inevitable that a brutal restructuring, much like the recent bankruptcy filings of Payless Shoes, is about to follow.

If Rue21 does not file for bankruptcy first, Gymboree’s filing will be the fifteenth retail bankruptcy so far this year.

And it isn’t even Memorial Day yet!

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#mallperils

Barnil is a Staff Writer at The American Genius. With a Master's Degree in International Relations, Barnil is a Research Assistant at UT, Austin. When he hikes, he falls. When he swims, he sinks. When he drives, others honk. But when he writes, people read.

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  1. Pingback: No jamboree at Gymboree as it's added to the bankruptcy spree - The American Genius

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