Brookstone Files for Chapter 11 Bankruptcy
An increase of online purchasing and a decline of foot traffic in shopping malls and stores has caused some companies to go bankrupt. Recently, these “brick and mortar” retailers include Radio Shack and Toys ‘R’ Us. Now, another popular gift store, Brookstone, famous for personal massagers, tech gadgets, and travel accessories is filing Chapter 11 bankruptcy. Brookstone plans on reorganizing their debt through Chapter 11 and close all stores. Other well-known retailers located in malls who have also filed for bankruptcy, due to the lack of mall traffic, include Rue 21, Wet Seal, and The Limited. The Brookstone company intends to maintain their brand and sell its products, just not at a store in a mall.
Chapter 11 bankruptcy includes a plan to repay creditors over time, still allowing the business to continue to operate. Brookstone will maintain their online and wholesale business. One of the top-sellers online at Brookstone are the Shiatsu Foot Massager with heat, Bluetooth headphones, and luggage with charging ports. The gift and gadget chain store will also keep open 35 stores that are located in airports, as they sell popular items to travelers such as neck pillows, luggage, and travel gear.
It is a little known fact that the Brookstone brand name can be seen in the movie Jurassic World. In some shots of the movie, you can see the Brookstone signage. Maybe you have seen the episode of The Office where Dwight makes mention of Brookstone when looking for a specific gadget? Unfortunately, the placement of their brand in the movie Jurassic World or mention in a pop culture sit-com did not boost sales enough to dodge bankruptcy.
Chapter 11 Bankruptcy
Here’s another little known fact: this is not Brookstone’s first bankruptcy filing. The retailer filed for Chapter 11 bankruptcy back in 2014. It continued to keep its store locations open as it was sold to a business out of China. Why Chapter 11? This chapter bankruptcy protection helps business with overwhelming debt.
A reorganization plan is created in the Chapter 11 process which allows a company to pay back creditors over time while still running the business. A petition is filed with the bankruptcy court, then a disclosure statement and a reorganization plan. The debtor lists assets, business affairs, and liability in the disclosure statement. The bankruptcy court appoints a bankruptcy trustee to supervise the Chapter 11 case. The plan of reorganization is prepared, approved, then implemented. The trustee oversees the bankruptcy case and the plan.
Not all businesses who enter into a chapter 11 bankruptcy make it through the reorganization of debt. Toys R Us bankruptcy filing put them into a Chapter 11 in which they could not recover and they closed their doors earlier this year. Read about the Toys R Us Chapter 11 bankruptcy here.
Chapter 22 Bankruptcy
Filing two Chapter 11 bankruptcies is sometimes called a “Chapter 22.” Chapter 22 bankruptcy doesn’t really exist, but when a company does not fix the financial problems after filing the first Chapter bankruptcy, then files a second Chapter 11 bankruptcy, well, 11 and 11 is 22. Brookstone, a “Chapter 22 Company,” has felt the effects of the decline of people spending money at malls, and buying on-line or using giant shopping sites such as amazon.com.
The future of the Chapter 22 company
As customers choose to shop online instead of in stores, Brookstone cannot survive the hit they are taking by low store sales. Brookstone’s sales in 2017 were down 33 percent compared to 2016. The company plans to take steps to restructure the business, and put itself in a position to succeed financially in the future. With the online Brookstone sales making up around 40 percent of its business, it may not become a… Chapter 33?