July 10, 2017

Following in the steps of other troubled retailers,  Gymboree filed for bankruptcy protection  in an effort to slash $1 billion of its $1.4 billion in debt. They will stay in business due to an agreement with their lenders as they  restructure the organization  even borrowing $35 million more to finance operations.

Of nearly 1,300 stores branded Gymboree, Crazy 8 and Janie and Jack brands, the chain is expected to close 375 although they haven’t given specific details. Gymboree employs more than 11,000 people; unfortunately, many of those employees will soon be searching for a new job.

Gymboree’s struggles of declining mall traffic, inflexible rental costs and the rise of online stores causing financial trouble isn’t new. Payless ShoeSource, Rue21, and The Limited all have faced similar woes. In fact, Credit Suisse predicts that by 2022, up to 25 percent of America’s malls could close.

People are shopping online more and more, but online revenue only represents  21 percent of Gymboree’s bottom line. Chief Restructuring Officer James Mesterharm claimed the company’s web systems are outdated, making it difficult for them to keep up in a rapidly changing industry. Gymboree only recently introduced store email, analytics and tablet computers for employees, all evidence that Gymboree lags in innovation.

Throughout their  financial struggles , Gymboree has endured several key leadership changes. Chief Financial Officer Andy North has been replaced by interim CFO Liyuan Woo. The company’s CEO, Mark Breitbard, resigned and was replaced by Daniel Griesemer, though Breitbard will remain on staff as chairman. New CEO Daniel Griesemer’s statement on the company’s future can be summarized with hopes that the organization can stay up to date and move forward toward long-term growth.

Gymboree still posted a profit of $71 million in 2016 though down from $94 million in 2015. Filing for bankruptcy while still profitable cold be the act of saving grace for the future of Gymboree.

The changing retail economy has affected individuals and businesses alike, resulting in the need to restructure finances. If you are struggling financially, call us today to see if  bankruptcy  is right for you.

Larry Bellomo is an Orange County Bankruptcy and Family Law Attorney practicing in southern California for over 30 years.