Watching a once-popular retailer go through a Chapter 11 filing can be a bit like watching a distant relative battle a terrible medical prognosis. There might be periods of hope where it feels like a positive outcome remains possible, but those are often punctuated with a sad reality.
In some cases, a white knight savior emerges. David's Bridal, for example, was in its final days when a buyer emerged to keep the chain open.
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Sometimes, as was the case with Bed Bath & Beyond and Tuesday Morning -- two companies that were recently liquidated -- the process has multiple highs and lows. Both retailers emerged from Chapter 11 only to fall back into it ultimately and not being able to find a way to survive.
It's a tale that has, in varying ways, claimed Circuit City, Toys R Us, Linens N' Things, Sports Authority, Pier 1, Modell's, and many other former retail titans in recent years. But, until a chain moves from Chapter 11 to Chapter 7, hope remains.
Stores have been saved even after a liquidation sale, but that is not what happened with Christmas Tree Shops, a popular New England-based discount retailer. That chain, which closed its doors for the final time across all its locations on August 12, will not be reopening and its Chapter 7 filing contains more bad news than simply the once-loved store going away.
Image source: TheStreet
Christmas Tree Shops moves into Chapter 7
Christmas Tree Shops, which had been using the name "CTS" in its final months, closed its doors on August 12 for the last time. In the weeks before that, the company had been undergoing a liquidation sale run by an outside company, Hilco Global.
Typically, when a retailer decides to liquidate, a third party is brought in to manage the process. That company often brings in merchandise that was not originally sold by the retailer to supplement the sale. In most cases, the final stages of the going out of business sale involves selling the store's fixtures and really anything that isn't the property of the landlord.
In this case, it became known in an August 16 court hearing that Hilco Global's projections for the sale were off by $14 million. That left it unable to pay Christmas Tree Shop workers.
"During the hearing, lawyers from Christmas Tree Shops and the liquidation company Hilco Global went head to head in bankruptcy court over the incorrect projected revenue and employee pay," NBC Connecticut reported. "The judge presiding over the case said for employees to not get paid is unacceptable. Lawyers agreed to get 1,500 employees paid as soon as possible, saying hopefully within the next two weeks."
Employees were also promised retention bonuses if they stayed until the chain's final day. Those bonuses have yet to be paid.
Christmas Tree Shops, during the court hearing, called those bonuses a "miscommunication" arguing that bonuses had only been approved for workers at the first ten stores to close.
A sad end for Christmas Tree Shops
Restore Capital, which is one of Christmas Tree Shops' lenders and an affiliate of Hilco, issued the following statement to NBC Connecticut.
As stated to the Bankruptcy Court at the hearing on Wednesday, August 16, 2023, Restore Capital (one of Christmas Tree Shops’ lenders and an affiliate of Hilco Merchant Resources (the firm that handled the post-bankruptcy store closings for Christmas Tree Shops)) will fund payroll for ALL hourly employees for hours worked for the pay period ending August 12, 2023 as soon possible. The payroll will be processed by Christmas Tree Shops through typical methods, which could happen as early as Friday August 18, 2023, but may not happen until early next week.
The liquidation company blamed Christmas Tree Shops for the delay. No comment was made about the promised bonuses and employees were advised by the court to file a complaint with their state's department of labor.
Now that the bankruptcy has moved from Chapter 11 to Chapter 7, the company's remaining assets and intellectual property (essentially its name and website) will be auctioned off at a later date.
