Brookstone Files Bankruptcy…Again.
With Filings in 2014 and Again in 2018, Closing All Stores Except Airport Stores
Brookstone has a gift for every occasion! Did you know that the best selling gifts online at Brookstone in 2018 are the Shiatsu Foot Massager with heat, bluetooth headphones, and a carryon luggage bag with charging ports? Despite their online presence, Brookstone, a gift and gadget chain store, filed Chapter 11 bankruptcy. The company will eventually close all mall stores. Other “brick and mortar” retailers such as Toys ‘R’ Us and RadioShack have also filled for bankruptcy recently. People shopping on the internet and using amazon.com have caused Brookstone to close underperforming store locations.
Known for products such as neck and back massagers, Brookstone’s online and wholesale business will continue operating. 35 stores located in airports will also remain open, since the business is very popular for selling travel accessories, neck pillows, and luggage gear.
There is a decline of shoppers spending money in malls, and Brookstone has felt the effects of the growing demand for internet shopping. The company is closing all of its mall stores across the U.S. Other well-known mall-based retailers who have also filed for bankruptcy, due to the lack of mall traffic include Rue 21, Wet Seal, and The Limited. The Brookstone company hopes to maintain their brand and products, just not at a mall store.
Two Chapter 11 Bankruptcies Makes This a Rare “Chapter 22”
This is not the first time Brookstone has filed for bankruptcy. In 2014, the retailer filed for Chapter 11 bankruptcy. Because it was later sold to a Chinese business, it continued to keep it’s locations open and running. When a business fails to fix their financial problems after filing the first Chapter 11, then have to file Chapter 11 again, they are sometimes referred to as a “Chapter 22” company. Chapter 22 is not a real bankruptcy chapter, it is just named this because one Chapter 11 filing plus another Chapter 11 filling equals a “Chapter 22” bankruptcy filing.
As customers choose to shop online versus at a store in a mall, Brookstone cannot contain the hit they are taking by low store sales. They plan to take steps to restructure the business, and put it in a position to succeed financially in the future. Online Brookstone sales make up around 40 percent of its business. Its 2017 sales were down 33 percent from 2016.
Unfortunately the (obvious) placement of the Brookstone brand name in the movie Jurassic World didn’t help its sales enough to elude bankruptcy. In some of the overhead shots in Jurassic World, Brookstone signage can be seen in the movie.
A Chapter 11 bankruptcy is typically filed by a corporation burdened heavily with debt. This chapter of bankruptcy protection proposes a reorganization plan to keep the business running while it pays creditors over time.
How does the Chapter 11 bankruptcy process work? Much like a typical consumer chapter 7 or chapter 13 bankruptcy, a petition is filed with the bankruptcy court. Then in a chapter 11, a disclosure statement and a plan of reorganization is filed with the bankruptcy trustee.. The disclosure statement lists the debtor’s Company’s) assets, liability, and business affairs.
The Chapter 11 reorganization plan is prepared, confirmed, then implemented. The bankruptcy court will appoint a Chapter 11 case to the supervision of a bankruptcy trustee. The trustee monitors the bankruptcy case and the plan. Jut because a business files Chapter 11 bankruptcy, it doesn’t always mean that they will survive. For instance, Toys R Us bankruptcy was an attempt to re-organize in a ch 11 bankruptcy but in the end resulted in them closing all of their stores and going out of business.
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