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Gymboree to exit bankruptcy

BY Marianne Wilson

Children’s apparel retailer Gymboree Corp. will exit Chapter 11 bankruptcy as a going concern — and with a reduced footprint.

The children's apparel retailer won court approval to exit bankruptcy with a reorganization plan that includes a comprehensive recapitalization that will eliminate about $1 billion in debt. It expects to complete its financial restructuring process and emerge from Chapter 11 by the end of the month.

Gymboree filed for Chapter 11 bankruptcy in June 2017. According to court filings, the company plans to close 330 underperforming stores. Post-bankruptcy, it will have a $225 million credit facility, a $48.5 million exit asset-backed term loan replacement facility and a $35 million exit term loan facility.

"We are very pleased with the Court's approval of our plan, which marks a major milestone in Gymboree's restructuring process and facilitates a path forward to our emergence as a stronger and more competitive organization," said Daniel Griesemer, president and CEO of Gymboree. "While there is still work ahead to complete the process, we are excited about the future opportunities for Gymboree as we continue to transform the business."

As of April 29, 2017, the Company operated a total of 1,281 retail stores: 582 Gymboree stores (532 in the United States, 49 in Canada and one in Puerto Rico), 172 Gymboree Outlet stores (171 in the United States and one in Puerto Rico), 149 Janie and Jack shops (148 in the United States and one in Puerto Rico) and 378 Crazy 8 stores in the United States.

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Kroger Q2 profit falls on price cuts as same-store sales rise

BY Marianne Wilson

Aggressive price cuts took a toll on the nation's largest grocery store operator in its second quarter.

Kroger Co.'s net income fell to $353 million, or 39 cents per share, in the quarter ended Aug. 12, from $383 million, or 40 cents per share, in the year-ago period. Its results were in line with the Street estimates. Gross margins fell by 30 basis points.

Kroger has been cutting prices in the wake of increased competition from online competitors, Walmart and such deep-discount players as Aldi. Neil Saunders, managing director of GlobalData Retail, called such cuts a "necessary evil" if Kroger is to maintain its competitiveness and dominance in the sector. The good news, he added, is that the strategy appears to be paying off in terms of sales.

Kroger's revenue rose 3.9% to $27.6 billion from $26.6 billion last year, topping analysts' estimate of $27.5 billion. Same-store sales edged up 0.7% after two consecutive quarters of declines, better than the expected 0.4% growth.

"We returned to positive identical supermarket sales growth in the second quarter," said chairman and CEO Rodney McMullen. "We had strong growth in both loyal and total households. Traffic is up, unit movement is up, market share is up, and our customers' price perception is excellent and continues to improve."

Kroger confirmed its 2017 net earnings guidance for 53 weeks of $1.74-$1.79 per diluted share. It expects same-store sales to rise 0.5% to 1% excluding fuel. But the company said its expectations do not include any impact from hurricanes Harvey and Irma.

"As our business continues to improve, we remain committed to delivering on our guidance in 2017 and believe we have the ability to grow identical supermarket sales and market share in 2018," McMullen said.

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Destination Maternity CEO out; Q2 sales slide

BY Marianne Wilson

Destination Maternity is looking for a new chief executive.

The struggling maternity apparel retailer said that Anthony M. Romano is stepping down as president, CEO and board member as part of a mutual agreement, effective Sept. 7. Romano has served in the role since 2014, and, prior to that, was president and CEO of Charming Shoppes. His departure follows the recent termination of an agreement for Destination Maternity to be acquired by France's Orchestra-Prémaman.

Allen Weinstein, an independent director of Destination Maternity, will serve as interim CEO until a permanent replacement is found. Weinstein, a director of the company's board since January 2010, is currently executive chairman and a director of Villa, a privately owned footwear and apparel retailer

"Despite the investment of significant time, effort and resources into the proposed merger with Orchestra-Prémaman, it was ultimately not completed," said Romano. "Consequently, my fellow board members and I have reached a mutual decision that now would be a good time to make a change to allow for a fresh look at Destination Maternity.

Destination Maternity and Orchestra-Prémaman, a manufacturer and retailer of children's apparel and childcare products, entered into an agreement in December 2016. The deal was terminated in July, with the company citing, among other things, difficulties in satisfying French and U.S. regulators.

Destination Maternity has been struggling with sliding sales as online competition and decreased mall traffic impacted its revenues. On Wednesday, Destination Maternity reported net sales of $98.3 million for its second quarter, down from $106.5 million in the year-ago period. The decrease was attributed to the closure of underperforming stores, a 3.4% decline in comparable sales, and the exit of the company's relationship with Kohl's.

It reported a net loss of $2.8 million for the quarter, compared to a loss of $2.5 million in the year-ago quarter. On a per-share basis, losses, adjusted for one-time gains and costs, were 13 cents per share, compared to 14 cents last year.

The retailer incurred store closing, asset impairment and asset disposal expenses of $1.1 million in the quarter, compared to expenses of $0.4 million last year.

As of July 29, 2017 Destination Maternity operates 1,150 retail locations in the United States, Canada and Puerto Rico, including 507 stores, predominantly under the Motherhood Maternity, A Pea in the Pod and Destination Maternity banners, and 643 leased department locations. The company also sells merchandise on the Web through its websites.

In addition, Destination Maternity has international store franchise and product supply relationships in the Middle East, South Korea, Mexico, Israel and India. It has 210 international franchised locations, including 18 standalone stores operated under one of the Company's nameplates and 192 shop-in-shop locations.

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