NEW YORK — Gadzooks, moving quickly to bring its house in order, has filed for bankruptcy court protection and is seeking to oust its president and chief merchandising officer, Paula Masters.
As expected, the teen retailer filed its Chapter 11 petition in a Dallas bankruptcy court. The filing, on Tuesday, confirmed stories first reported in these columns in December that a bankruptcy might be in the cards for the Carrollton, Tex.-based chain.
The surprise, however, was a court filing seeking to end a “Severance Protection Agreement” with Masters so early in the case. In addition, court papers said that on Feb. 2, the retailer provided its former president and chief merchant with a written notice of its intent to terminate her employment “for cause.”
The same documents said due to the “sensitive nature of the contents of the notice,” that it did not attach a copy of it to the request to end the severance agreement, but could provide the court with a copy if required. The company also said the notice “clearly spells out the debtor’s cause for its intended termination of Masters.”
Neither Masters, who is still employed by Gadzooks, nor Jerry Szczepanski, chairman and chief executive officer, could be reached for comment.
The agreement, dated July 1, 2001, was initially for a one-year term, but was automatically extended twice through June 30, 2003 and through June 30, 2004. Under the terms of the agreement, “cause” is defined as either “intentionally and continually” failing to perform “reasonably assigned duties” or “intentionally engaged in conduct which is demonstrably and materially injurious to the company.”
Both instances require a written notice to Masters regarding the company’s contention, and in the latter scenario, allows her an opportunity to speak before the board with the assistance of counsel, if desired.
According to the proxy statement filed on May 13, 2003 with the Securities and Exchange Commission, Masters, 40, has served in her current positions since March 2001. Her salary was listed as $402,000. She’s been with Gadzooks since January 1999, joining as vice president, general merchandise manager, until October of the same year when she became senior vice president, gmm. Prior to joining Gadzooks, she was vice president, divisional merchandise manager from January 1996 to December 1998 with Elder-Beerman, where she was responsible for that company’s junior sportswear and dress business. From May 1986 to December 1995, Masters served in a variety of capacities at Margo’s.Regarding the bankruptcy, Gadzooks said it was necessary to allow it time to complete a reorganization of its core business of around 252 stores. In addition to 31 stores currently being liquidated, another 125 stores will be shuttered under the plan. About 65 corporate and field positions will also be eliminated. The firm currently operates 410 stores in 41 states.
The retailer, which caters to teens between ages 16 and 22 years old, has reached an agreement with Wells Fargo Retail Finance for debtor-in-possession financing, pending court approval.
Gadzooks, struggling for the last three years, disclosed in a regulatory filing with the SEC in December that its quarterly same-store sales results have been in negative territory for the last three quarters, and that the firm was struggling with its transition to an all-junior merchandise mix. Historically, Gadzooks catered to the apparel needs of young men and women. That changed in July. Additionally, many of Gadzooks’ vendors rely on factoring agreements to insure payment of their invoices, and several factors late last year either stopped approving orders or modified their terms.
Gadzooks Bankruptcy Facts Creditors Holding 10 Largest Unsecured Claims:*
Company: Amount: 1. Liberty Acorn Fund $6 million 2. Evergreen Special Values Fund $4 million 3. Provident Premier Master Fund $2.7 million 4. Simon Property Group $1.3 million 5. General Growth $1.2 million 6. Von Dutch Originals $1 million 7. Craig Hallum $1 million 8. Quiksilver $845,107 9. Excell Canada $778,917 10. CBL $584,815
Total Liabilities: $42.5 million Total Assets: $84.6 million
Investors holding 5 percent or more of the voting securities: Columbia Wanger Asset Management; Royce & Associates; Evergreen Investment Management Co.; Dimensional Fund Advisors, Inc.; Fuller & Thaler Asset Management; Vanguard Group and Barclays Global Investors.
Source: Court filings. *Includes trade debt, subordinate debt and rent.
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)
Not only does #TheProfit return to CNBC tonight, but @marcuslemonis has launched @shopmarcus, a new shopping and lifestyle retail experience in Aspen and Chicago, with more locations to come. The retail stores offer in-store stylists and a variety of contemporary womenswear selections.
“It’s life, I’m going to face it,” @mingxi11 sighed. “I fell, but you know, I think the most important thing is that I get back up. I had the love, the help from my sister — the girl next to me Gizele [Oliveira] — she’s so nice. When I went backstage everybody was trying to comfort me like ‘Oh Ming, it’s OK.’ I’m really, really touched. I think it’s them who gave me the courage to go back on stage for the finale,” Xi told WWD of her fall at the @victoriassecret fashion show. (📷: David Fisher) #wwdfashion #vsfashionshow #victoriassecret
@louisvuitton tapped @therealpeterlindbergh for its latest city-centric photo book, which is part of a series called Fashion Eye. The primarily black and white book captures the spirit of Berlin in 57 images shot between 1989 and 2019. “Berlin is an inspiration for me, more than a city. I mean @millajovovich is simply Berlin!” said Lindbergh. #wwdfashion
“You know, I think audiences expect a certain performance so I have to deliver to them what they’re expecting to a certain degree. But I’m also a different actor and a different person, I have my own spin on the character,” says @noahegalvin of his takeover of the leading role in “Dear Evan Hansen” following the departure of @bensplatt, who originated the role. Read WWD’s interview with the 23-year-old actor on WWD.com #wwdeye (📷: @jilliansollazzo)
For pre-fall 2018, @etro created richly-colored wonderland, using tapestries, textiles and wallpapers from the Eastern world at large. The line featured floral and graphic prints and jacquard motifs, like this two-piece look featured here. #wwdfashion (📷: Giovanna Pavesi)
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)