Following a holiday season of slow sales, major retailers Macy’s and Sears Holdings announced that they will be closing more than 200 stores combined during 2017. Sears Holdings, which operates both Sears and Kmart stores, will close 108 Kmart stores and 42 Sears stores during the coming months. Macy’s announced that it will shutter 68 of its stores during 2017 as part of its larger plan to close 100 stores.
Neither company has filed for bankruptcy. These closures are attempts to cut losses and avoid accruing debt that could push them into bankruptcy.
Steps Large Companies Take Before Filing for Bankruptcy
Bankruptcy is often a last resort for unprofitable companies. Before filing for bankruptcy, a company will generally attempt to become profitable through a few different strategies.
One of these strategies is restructuring. Rather than having to submit a restructuring plan to a bankruptcy court and having it approved, a company might try to restructure on its own to cut costs. Amid this restructuring, the company might try to negotiate a deal with its creditors to pay off some or all of its debt. In many cases, an outside consultant is brought in to handle this process.
A company might also take steps to cut costs, such as reducing its labor force or changing its offerings. It might scale back marketing efforts or, like Sears Holdings and Macy’s will do over the coming months, close low performing locations either by shutting them down or opting not to renew their leases when they expire. This is generally accompanied by liquidation sales of merchandise and in some cases, store fixtures in an effort to bring money back into the company.
21st Century Challenges for Big Box Retailers
Retailers like Sears and Macy’s have had a difficult time keeping up with online retailers like Amazon. To put this into perspective, consider this: Amazon is currently worth $370 billion, more than the following retailers combined: Kohl’s, Macy’s, JC Penney, Nordstrom, Barnes and Noble, Best Buy, Sears, Dillard’s, Gap, and Target.
Macy’s has stated that amid its store closures, it will invest heavily in its online sector, hoping to regain market share and cater to today’s customers’ needs.
Work with an Experienced Rolling Meadows Bankruptcy Lawyer
No company is immune to changing consumer interests and slowing sales. Neither is any company immune to changes in our economy that drive consumer spending habits. When a company is no longer profitable, bankruptcy can provide relief through restructuring and a discharge of the company’s debt. But bankruptcy is not a “magic bullet” and in some cases, companies continue to struggle even after restructuring. To learn more about the bankruptcy process for large companies as well as small businesses and individual filers, speak with one of the experienced bankruptcy lawyers at Newland & Newland, LLP. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Caldorwards4)