Filene’s Basement Files Again?
Syms Corp. and wholly-owned subsidiary Filene’s Basement LLC recently filed for Chapter 11 bankruptcy protection. Syms Corp. subsequently announced it will liquidate all stores and assets over the coming several months.
Syms Corp. was founded in 1959, and Filene’s Basement dates back to 1908. Syms Corp. acquired the assets of Filene’s Basement Inc. in a 2009 bankruptcy auction. The company’s CEO said the company faced increasing competition from large department stores, a proliferation of private-label discount chains, and a decline in buying opportunities, all combined with the economic downturn. These factors affected both chains and came at a time when Filene’s Basement, which was just emerging from bankruptcy, was already waging an uphill battle to rebuild its customer base.
This is the third time Filene’s Basement has filed for bankruptcy protection; the first time was in the 1990’s. Now, only two years after the discount retailer emerged from its second trip through Chapter 11 with the acquisition by Syms Corp, the company can’t make it work, because the brand-conscious consumer continues to have more places in which to shop. Luxury retailers such as Nordstrom has focused more on its discount concept Nordstrom Rack to retain customers due to tighter budgets, and kept them as brand loyal shoppers. Also, over the past few years, department stores have held on to their merchandise, selling goods at deeper discounts directly to the consumer and limiting opportunities for these Filene’s Basement types of outlet stores.
Syms Corp. was an off-price retailer, buying excess merchandise directly from manufacturers at a discount. Most off-price retailers did well during the recession as consumers traded down and spent less money, but sales in the segment have been weaker in the recovery as some shoppers begin returning to luxury goods.
The liquidation of all 25 Syms and 21 Filene’s stores is expected to run through approximately January 2012. Earlier this month, the U.S. Bankruptcy Court approved Syms’ motion to enter into an agreement with a joint venture of Gordon Brothers Retail Partners and Hilco Merchant Resources, authorizing them to sell merchandise and owned furniture, fixtures and equipment through store closing sales and further authorizing Syms to abandon unsold merchandise and furniture, fixtures and equipment after conclusion of the sale. The closings will result in the loss of about 2,500 jobs.
What are the real estate implications? As in the case of Borders, Hollywood Videos, Linens ‘n Things, and other companies that have disappeared from the retail scene, mall developers are going to have more spaces to fill. However, unlike many of these other now out-of-business locations, the Syms and Filene’s stores are “big box” and therefore less attractive to many of the growth concepts. At the end of its most recent fiscal year, Syms Corp. had 49 stores operating more than 2.3 million square feet of retail space; many of the stores are 50,000 square feet or larger. Additionally, 23 of the stores had leases that don’t expire until 2015 or later, leaving landlords on the hook to quickly try to find tenants to cover the rent. In malls where Syms or Filene’s was considered an anchor, other tenants may start an exodus or try to renegotiate their leases to make up for the lost traffic.