Dive Brief:
- Gift retailer The Paper Store exited Chapter 11 Tuesday, after filing for bankruptcy less than 50 days ago.
- Backing the retailer in its reorganization is a group of investors led by real estate firm WS Development, the company said in a press release emailed to Retail Dive.
- The group buying The Paper Store out of bankruptcy paid $22 million for the retailer along with assumed liabilities, according to court documents.
Dive Insight:
The Paper Store filed for bankruptcy in mid-July eyeing a quick sale of its business that would keep the entity alive. It set a tight timeline for itself to do so, acknowledging the importance of keeping the retailer on track and operating with certainty about its future going into the holiday season, which is crucial for everyone but all the more so for a gift specialist like The Paper Store.
The company got its quick sale and a relatively quick bankruptcy. Not all retailers to file this year can say the same.
Pier 1 and Stage Stores hoped for buyers and came up short, opting to liquidate in the end. Stein Mart, which filed in August, did so with an expressed hope of finding a buyer, but the company's chief executive acknowledged that an acquisition was unlikely given the current retail market, leaving liquidation the most likely scenario. J.C. Penney, too, has engaged bidders, but talks are at a stalemate and the department store stalwart's fate remains unclear.
The Paper Store got perhaps the best outcome it could out of bankruptcy. The retailer, founded in 1964 in Massachusetts by Robert Anderson, was still owned and operated by the Anderson family going into bankruptcy. With 86 stores based primarily in the Northeast, it was also a regional entity along with being a family enterprise.
Going into a turbulent 2020, the retailer's sales and profits wavered, with a restructuring consultant blaming everything from weather to the New England Patriots' loss in the NFL playoffs.
COVID-19 brought an onslaught of financial woes as the company closed its store base. Corporate went down to a skeleton crew; the founding family waived their salaries; the retailer skipped rent and pushed out vendor payments. Despite those efforts, the company still couldn't manage to operate outside of creditor protection, in part because landlords showed scant interest in concessions.
Exiting bankruptcy at least offers the retailer a second chance. Tom Anderson, CEO and president of The Paper Store, said in the press release that WS Development's principals "made a meaningful commitment to our future and have allowed for our family-run business to continue serving our communities."
The Paper Store is one of a class of gift retailers to file since 2019. The list also includes the parent of the Papyrus stationery store and Things Remembered.
The Paper Store's fate is worth watching. There have been bankruptcies this year that were likely fated for years, and others truly made unavoidable because of the pandemic. In both cases, the bankruptcy system is being tested to see if it is up to the task of managing an economy and retail industry thrown into tumult from the COVID-19 crisis.
