Marshall’s Rival Stares Down Chapter 11 Bankruptcy | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Consumers need to watch for signs that their favorite retailer may face bankruptcy risks, because a bankrupt retailer may not honor returns or gift cards.

As someone who has covered retail for over 30 years, I have noticed some telltale signs.

Less inventory: Before its most recent bankruptcy, JCPenney’s shelves were often missing common sizes and were more barren than usual.
Fewer workers: Cutting back on labor saves money in the short term.
Lack of cleanliness: When a retailer tries to save money, it starts to let things like maintenance and cleanliness go.

“Consumers should sharpen their bankruptcy radar. Empty racks with steep sales, closing stores and a reduction of floor staff can all be indicators a retailer may be headed for bankruptcy protection. It’s up to the consumers to protect themselves,” Eric Klein from Klein Law Group told Forbes.

Some retailers, however, hide their financial troubles better than others, and that’s where hard data become key. Recent data from Fitch, Moody’s, and S&P Global show that Gabe’s, an off-price clothing chain, faces a significant risk of bankruptcy.

Most retailers keep bankruptcy details quiet

Only publicly traded retailers are required to report when they’re at risk of bankruptcy. Even then, they try to make it seem like it’s business as usual. That’s because once it seems likely that a retailer will file for bankruptcy protection, consumers stop buying gift cards and pull back on any purchases they might want to return.

Saks Global, which filed for bankruptcy on Jan. 14, issued a statement to TheStreet, responding to a Dec. 23 financial analysis published on the website. The analysis showed it was likely the chain would soon file for bankruptcy.

“We are making strong progress to reduce outstanding payments, invest in our transformation and drive improved performance,” a Saks Global spokesperson shared via email.

“It is important to note that a restructuring is not being contemplated. We have sufficient liquidity after raising $600 million in financing this summer from existing bondholders. At the same time, with inventory levels normalizing and the significant synergies from our integration, we expect performance to improve through the holiday season and into 2026.”

It was a vehement denial, even though the numbers made it clear that filing was imminent.

Now, data show that Gabe’s could face a similar fate.

Gabe’s has significant financial problems.

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Gabe’s faces Chapter 11 bankruptcy filing

Gabe’s has admitted to some financial struggles, and over the summer, it conducted an out-of-court restructuring. That move reduced debt, but has not solved its financial problems.

Data show that the situation remains tenuous.

Fitch “Top Tier (Tier 1) Market Concern”: These businesses are expected to default within the next two years, “with many expected to default in the next 12 months.”
Moody’s“Caa3”: These businesses are in the lower performance end of this category and have poor standing and a “very high credit risk.”
S&P Global“CCC”: These retailers have “default scenarios envisioned in the subsequent 12 months.” Source: Retail Dive

These numbers do not guarantee a bankruptcy, and Gabe’s new owners could certainly provide the cash needed to avoid a filing.

More Retail:

“Despite the infusion, S&P in November said the capital structure of Gabe’s parent company remained unsustainable and it could ‘envision default scenarios over the next 12 months due to liquidity constraints.’ Those analysts said Gabe’s restructuring reduced debt by $115 million and brought in $55 million to fund operations,” added Retail Dive.

Gabe’s did not answer the website’s request for comment.

Gabe’s escaped Chapter 11 once before

Gabe’s operates in the same space as Marshall’s, TJMaxx, and Ross Dress for Less. It’s much smaller than those brands, however, which may impact its access to top off-price merchandise.

The off-price retailer operates approximately 160 stores across 20 states.

In November, it said it successfully closed a strategic transaction with a “highly supportive group” of its existing investors. The investors include Brigade Capital Management, Arbour Lane Capital Management, and Anchorage Capital Advisors, Chain Store Age reported.

That transaction converted more than 75% of Gabe’s outstanding term loan obligations into equity, acquiring it from private equity firm Warburg Pincus, which acquired Gabe’s in 2016 from Alvarez & Marsal Capital, according to a Gabe’s press release.

“In connection with the transaction, Gabe’s reached mutually beneficial agreements with more than 1,000 vendor partners to ensure the company’s relationships support its long-term growth and a healthy merchandise mix,” it shared.

“The company also completed constructive negotiations with many of its landlords and is finalizing further agreements with certain strategic leaseholder partners as part of this optimization process to build a more resilient and future-facing store portfolio.”