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Report: Gymboree to Close Stores as Bankruptcy Looms

The Gymboree Corporation children’s wear retailer is said to be planning to restructure and trim its fleet under bankruptcy protection.

The Wall Street Journal reports that sources with information on the matter say the 1,300-store company, which also operates Janie and Jack and Crazy 8, could close 350 stores, though the final number is still being determined.

Some of the unnamed sources pegged the bankruptcy filing to next week. Neither Gymboree nor Bain Capital, the private equity firm that acquired the company in a $1.8 billion leveraged buyout in 2010, are commenting on these developments.

The company reported a comparable store sales decrease of 5 percent for the second quarter of fiscal year 2017, ended Jan. 28, compared to the fourth quarter 2015 (used as comparison due to changes in the company’s fiscal year calendar). These losses were largely attributed to Gymboree and Crazy 8, both of which were down by 6 percent, while Janie and Jack managed a same store sales improvement of 1 percent.

Gross profit dropped to $116.4 million and 32.6% of net sales from $148.8 million and 39 percent of net sales. A drop-off in traffic, excess inventory and expedited shipping were all cited as culprits.

Most damaging though is the $1.04 billion debt on the company’s balance sheet that will mature in 12 to 22 months, of which $871.9 million is due in under a year.

In a filing with the SEC in March, the company stated it was in talks with lenders to refinance at least a portion of its debt to sustain liquidity or the company could default.

The Journal reports the retailer’s term loan holders may fund its restructuring, enabling Gymboree to continue operations through bankruptcy.

Like Neiman Marcus and J.Crew, Gymboree is the latest retailer to struggle under heavy debt loads, and depending on the timing of its filing, could be the year’s fifteenth retail bankruptcy. But only if it files before Rue21, which is rumored to do so next week as well.