Gordmans reportedly preparing to seek bankruptcy protection

Dive Brief:

Midwestern discount department store Gordmans is preparing to file for Chapter 11 bankruptcy protection, possibly as soon as this month, sources told Bloomberg. However, Gordmans SVP of Marketing Amy Myers told Retail Dive in an email: “Gordmans doesn’t comment on rumor or speculation.”
The Omaha-NE-based retailer has a roughly $85 million debt load, and much of it is due in 2020, Bloomberg reports.
Private equity firm Sun Capital bought the company in 2008 and took it public in 2010. After a secondary public offering in 2012, the company spent the next two years boosting its store count in the region by a third, launching a national website in 2015.

Dive Insight:

The department store retailer, once known as Richman Gordons and a fixture of the Midwest, was founded in 1915 and now runs 106 stores in 22 states, according to its website.

After Gordmans’ expansion under Sun Capital, growth slowed and it has struggled with sales for several quarters. Sales fell 75% in the past year alone, according to Bloomberg, and in January, the company announced an unspecified number of job cuts amid “the current sluggish retail environment.”

Though not unusual for a private equity-owned company, Gordmans is also loaded with debt: Average borrowings during the thirty-nine week periods ended October 29, 2016 were $31.7 million, compared to $19.5 million as of October 31, 2015, according to a Securities and Exchange Commission filing.

In recent years, as Gordmans has taken on debt and expanded, rival J.C. Penney has been trimming its store count and more or less righting its ship by offering customers appliances and Sephora concessions.

Department stores are struggling in general as mall traffic has declined, the apparel market has softened and as off-price retailers like those of TJX Cos. have grabbed market share. Discount and mid-market department stores are in a particularly precarious position. Kohl’s and Macy’s in particular; Macy’s recently slated 100 stores for closure and Kohl's lowered its year-ahead guidance after a dismal holiday season.