If anything is certain in today’s economic environment, it is that the retail industry feels the pain of a slow and volatile economy as much as, if not more than, any other industry. High unemployment and low consumer confidence mean low revenues and tighter margins for retailers. Consumers are not willing to spend as freely as before, and there is an ongoing and seemingly never-ending risk that one event anywhere in the world could change things on a dime. “Trendy” items can grow cold. Some big-box retailers are gone forever. More expensive items are experiencing a longer shelf life, and consumers are purchasing in smaller quantities. Retail outlets are being forced to increase budgets on advertisements while offering more sales and specials. When a retailer comes to the brink of insolvency and begins to consider options including whether to seek relief under the Bankruptcy Code, these and more issues are taken into consideration.
Retailers are especially impacted by cyclical markets and the need for capital to continue business operations in the early stages of bankruptcy. Being able to plan a strategic time to file bankruptcy can be crucial to start a retailer’s bankruptcy case off on the right foot and raise the probability of a successful reorganization. Common administrative issues that arise when a bankruptcy petition has been filed include keeping the lights and other utilities turned on, dealing with unexpired leases, honoring gift cards, staying competitive in the market, and appeasing secured lenders up front in order to assure availability of inventory, customer loyalty, and brand recognition during the bankruptcy proceedings.
DLG looks at all options with retail business owners, exploring the timing and whether to file for bankruptcy or work on restructuring outside of a court process. Chapter 11 bankruptcy can be a critical tool to use in order to restructure debts or provide a sale of assets or wind down of operations. Our attorneys have experience in the retail industry and can be of service in addressing industry-specific issues such as: