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Online selling forcing many retailers into bankruptcy

The increasing popularity of on-line selling by firms such as Amazon and others is having a severe adverse effect on traditional retailers in Kentucky and elsewhere. This effect has been recently demonstrated by the number of retailers filing for Chapter 11 protection from their creditors.

The most recent such filing was made by San Francisco-based Gymboree Corp., a seller of children's clothing. Gymboree management has stated that its goal is to reduce its overall indebtedness by $900 million. The company plans to operate most of its 1,300 stores during the bankruptcy proceeding, but some of its stores will be closed as part of the reorganization. Gymboree has obtained $308.5 million in financing to fund its operations during the bankruptcy process.

Other retailers that have recently sought bankruptcy protection include Payless Shoesource and The Limited. Payless has not finished the reorganization process, but The Limited has said that it will or has closed all 250 of its remaining stores. According to experts, the retailers who have been hardest hit by on-line shopping are mall-based clothing stores. Ascena Retail Group, Inc., the owner of such well-known brands such as Ann Taylor, Loft, Lane Bryant, Dress Barn and Justice has said that it intends to close at least 250 stores. Four hundred more stores will be closed if Ascena is unable to obtain rent concessions from its landlords.

Intense competition from on-line sellers threatens many other businesses besides clothiers. A business who is losing its customers to such competition may wish to examine bankruptcy as a method of reorganizing its debts and reorganizing its business. The advice of an experienced bankruptcy attorney may be useful in understanding and pursuing a Chapter 11 reorganization.

Source: Lexington Herald-Leader, "Gymboree files for bankruptcy protection to reduce debt," Associated Press, June 12, 2017

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