When money gets expensive, it becomes very hard for a struggling retail chain to recover.
Even when a lender can be found to keep the doors open, the added cost of servicing that debt makes it hard to make any changes, A number of retailers including Party City and Forever 21 managed to emerge from a Chapter 11 bankruptcy with new funding.
Related: Huge home improvement company files Chapter 11 bankruptcy
Both companies came out of bankruptcy with an operating plan. Party City had an aggressive plan that involved stores in new locations and pivoting part of its business model.
The problem is that making changes is expensive, and adding debt to a business model that already wasn’t working doesn’t leave enough cash to actually make big changes. These companies, and a handful of other recently bankrupt retailers, may have had the right idea about operational changes, but the cost of their debt killed them well before they got a chance to make those changes.
In many cases, a Chapter 11 filing merely delays the inevitable. The company gets some cash and some financial relief from its vendors, but its underlying problems don’t get solved.
Iconic Canadian chain closing down
While Hudson’s Bay may not be a brand name known to most Americans, it’s a leading retail chain in Canada. The company also operates three Saks Fifth Avenue stores and 13 Saks Off 5th locations under a licensing agreement.
Canada’s oldest retail chain, Hudson Bay, operates 80 stores in addition to the ones it licenses. It has run out of money and court documents show that it faces a very bleak future.
“Hudson’s Bay Company ULC, the Canadian entity that comprises the retailer Hudson’s Bay and TheBay.com, today announced it has filed documents with the Ontario Superior Court of Justice indicating that, despite exhaustive efforts to secure sufficient financing to pursue a restructuring transaction under the Companies’ Creditors Arrangement Act (CCAA), it has only secured limited debtor-in-possession financing that will require the full liquidation of the entire business. A store-by-store liquidation process will begin as soon as next week,” according to March 14 filing.
Hudson’s Bay has already begun liquidation at many of its locations.
More bankruptcy:
- Popular breakfast dining chain files for Chapter 11 bankruptcy
- Huge national car wash chain files Chapter 11 bankruptcy
- Troubled trucking company files for Chapter 11 bankruptcy
The chain also shared this message on its website.
“The Hudson’s Bay Rewards program is currently paused. At this time, customers are unable to earn or redeem points. We are not able to track or accumulate points on transactions made during this time and apply them retroactively. We apologize for the disruption,” it shared.
That’s a blow for loyal customers who won’t be able to redeem points earned in the loyalty program.
Hudson’s Bay has not given up hope
While the company’s current financial situation requires it to begin liquidating stores, Hudson Bay executives have not given up hope of a rescue.
“The company remains hopeful that key stakeholders, particularly its landlord partners, will engage to explore a viable alternative restructuring path that could preserve jobs, tenancy in retail locations, and a company with deep historic significance before it is too late. This alternative would necessitate significant capital and immediate and substantial cooperation from landlords and other critical partners,” it shared.
Hudson’s Bay currently employs just under 10,000 people. The company essentially pleaded for help in the media release about its shutdown.
Related: Huge mall retailer confirms Chapter 11 bankruptcy liquidation
“The closure of Hudson’s Bay would mark the loss of a key employer and retailer while drastically altering the dynamics of malls nationally by removing a major anchor and driver of customer traffic. The company is focused on securing the support needed to preserve as many jobs as possible while maintaining its longstanding position in Canadian culture and the economy,” it added.
Hudson’s Bay will share additional details regarding impacted locations, closure timelines, and customer accommodations, including final sales events. Once the liquidation sale begins, all sales will be final.