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Report: Gymboree Preps for Second Bankruptcy Filing Since 2017

Gymboree Group Inc. won’t be contributing to the 2.65 percent growth projected by IBM for the children’s clothing category in 2019.

The operator of 900+ children’s wear stores is on the hunt for a bankruptcy loan as it gears up for a Chapter 11 filing as soon as January—potentially its second in as many years, according to reports from The Wall Street Journal.

The troubled chain store group that owns and operates the Gymboree, Janie and Jack, and Crazy 8 retail brands touched off this round of financial drama when after Thanksgiving it reportedly started reviewing which and how many of its underperforming stores could get the ax.

A bankruptcy filing isn’t guaranteed, sources told WSJ, adding that ongoing talks could result in a different outcome. Gymboree is working with restructuring firm Miller Buckfire & Co. in hopes of offloading a number of its stores.

The company’s June 2017 filing sought to get Gymboree out from under more than $1 billion in debt resulting from a Bain Capital Private Equity LP leveraged buyout in 2010. The struggling competitor to The Children’s Place emerged from that bankruptcy proceeding with 360 fewer stores and $900 million lighter but still failed to right-size its operations.

More than anything, Gymboree has failed to innovate in brick-and-mortar, a telltale sign of trouble in an era in which physical retailing has renewed its focus on providing a meaningful experience as a means of attracting foot traffic. After operating its online store on the Borderfree platform for at least 13 years, Gymboree switched to the Salesforce Commerce Cloud, for which its digital agency Pierry, A Wunderman Company, received the 2018 Salesforce Partner Innovation Award in the cloud solutions category.

This Gymboree news might catalyze further talk of retail’s demise but the real story is likely that the chain stores potentially on the chopping block are part of the ongoing “overstoring” in the U.S.

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What’s more, parents seem to be interested in experimenting with new ways of discovering fresh brands and styling their kids. Take Rockets of Awesome, for example, one of the newer brands that’s likely capturing some of the market growth IBM’s projecting. There’s a subset of parents that prefers receiving quarterly subscription boxes tailored to their growing kids to navigating uninspiring stores with fussy, restless offspring in tow.

If this bankruptcy filing does come to fruition in January, allegedly the earliest potential filing date, it would be an ominous start to 2019 amid bearish market conditions and jittery investors. But it would be yet another irresistible opportunity for The Children’s Place, which “aggressively” targeted Gymboree shoppers during its first bankruptcy proceedings, CEO Jane Elfers said in Q2 2018 earnings call.