When a company enters Chapter 11 bankruptcy it almost always hopes to find a way to continue operating in some form. That's not always possible, especially when it comes to retailers in the current environment.
In order to emerge from a Chapter 11 bankruptcy, a retail chain generally needs concessions from multiple parties. In many cases, vendors have to forgive some debt, landlords may be forced to lower rents, and creditors may take equity instead of debt or extend the loan period.
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Reaching agreements with multiple parties can be challenging and a number of huge brands including Christmas Tree Shops, Bed Bath & Beyond, and Tuesday Morning have moved from a Chapter 11 reorganization to a Chapter 7 bankruptcy liquidation. There have, however, been some retail chains that have managed to find a buyer and/or needed financing and come out the other side.
Joann, Party City, and David's Bridal all filed for Chapter 11 bankruptcy and emerged from it in better financial condition. All three of those chains also managed to survive the process with the vast majority of their brick-and-mortar stores staying open.
Now, another retail chain that has filed for Chapter 11 bankruptcy has a deal on the table that would keep it alive, but its survival with come with a heavy cost.
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Easter Mountain Sports fight for survival
Eastern Mountain Sports' parent company filed for Chapter 11 bankruptcy in June. At the time of that filing, it shared that the company planned to close Bobs Stores, a clothing retailer that it also owned. The fate of EMS was less clear, but it was not shut down. Some locations did have liquidation sales.
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"As part of the Chapter 11 restructuring petition filed on June 18, 2024, to assist with a smooth transition while maximizing the value of existing inventory, Hilco Merchant Resources in a joint venture with Gordon Brothers will manage liquidation sales at select EMS locations and inventory blowout events at other EMS locations," Hilco shared in a press release.
Aside from those sales taking place, it was unclear what would happen to the remaining EMS locations. It's actually tricky to know how many stores EMS has because its website has been down since the filing.
That mystery, however, can be solved via the chain's LinkedIn page.
"Whether you’re learning a new sport or planning the adventure of a lifetime, we’re here to help you find everything you need to have more fun outside. In addition to our 21 retail stores throughout the northeast, we also operate schools in select locations offering climbing, paddling, backcountry skiing, and more," the company posted.
EMS has an offer to keep it alive
Mountain Warehouse, an outdoor gear and apparel company based in the United Kingdom has made a bid for the assets of EMS. That offer, however, would see two-thirds of the chain's locations close.
"Eastern Mountain Sports (EMS), a cornerstone of the outdoor retail industry, announces that Mountain Warehouse, a global leader in outdoor gear and apparel, has emerged as the stalking horse bidder in its acquisition process. Mountain Warehouse seeks to continue operating seven stores under the Eastern Mountain Sports name," the companies shared in a press release.
If seven stores would be kept open, that means that 14 would close. The media release tried to spin its bid as a positive because it would keep some locations open,
"This highlights their commitment to preserve EMS's storied legacy and continuing to serve the outdoor community. The remaining EMS locations are set to close, and inventory is available at incredible discounts at all locations," it added.
Any deal would require court approval and a higher bid for the assets could emerge. A higher bid, however, may not include keeping stores open and the bankruptcy court may factor that in when it decides the company's fate.
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Mountain Warehouse and EMS tried to use the retention of a brick-and-mortar presence as an argument for the court to approve the deal.
"EMS locations will be optimized to enhance efficiency and maintain a robust brick-and-mortar presence so that customers can continue to experience products firsthand and receive expert advice from knowledgeable staff. One of the most significant benefits of this prospective alliance is the ability to retain and support the dedicated employees of EMS," the companies shared.
People keeping their jobs is also something a bankruptcy judge can consider.
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