As True Religion fine tunes its list of stores to close, Gymboree has said it will begin store-closing sales on Tuesday at 350 locations.
Both retailers were bought by private equity firms and suffered from the legacy of over-leveraged balance sheets. Each one is now immersed in bankruptcy proceedings.
True Religion filed for bankruptcy a week ago and has told a Delaware bankruptcy court that it is currently engaged in landlord discussions for either the renegotiation of lease terms or an agreement to end certain leases. The company said in a court document filed Tuesday that it has closed 30 underperforming locations in recent years and “anticipates closing additional locations in 2017.” The average full-price store is 1,700 square feet. It currently operates 128 retail locations, which include 73 True Religion full-price stores, 53 True Religion outlet sites and 2 Last Stitch stores.
While the court document said the company has “already identified a number of leases for rejection,” it didn’t say how many were on the list.
Acquired by TowerBrook Capital Partners in 2013 for $835 million, True Religion plans to exit from bankruptcy proceedings with about a 72 percent reduction in funded debt, or down to $139.5 million from $493 million, through agreements with lenders who would exchange their debt claims for equity in the reorganized entity.
As for Gymboree, most of the stores set to close are for its Gymboree, Gymboree Outlet and Crazy 8 brands. The children’s retailer has hired Great American Group and Tiger Group, two known liquidators, to handle the closing sales.
Gymboree filed a voluntary Chapter 11 bankruptcy court protection in June in a Virginia bankruptcy court. The filing was considered a pre-packaged filing because the retailer had signed a restructuring support agreement with a majority of its term loan lenders. That agreement gave the company stakeholder support for its restructuring and recapitalization plan. It also helped the company reduce debt by more than $900 million.
Gymboree had been operating with significant leverage since Bain Capital acquired the company in 2010 in a leveraged buyout for $1.8 billion. Negative same-store sales trends and decreasing cash flow impacted its capital structure.
The company’s brands are Gymboree, Janie and Jack and Crazy 8. Prior to the filing of its bankruptcy petition, the company at the end of April operated a total of 1,281 retail stores. Those include 582 under the Gymboree nameplate; 172 Gymboree Outlet stores; 149 Janie and Jack shops, and 378 Crazy 8 stores.