Brick-and-mortar retailers in the age of e-commerce

Retail businesses that operate largely in traditional malls and standalone stores, rather than growing their online presence, may find it more and more difficult to compete. After all, the costs of major real estate holdings and commercial leases can drive up the retail prices they must offer, lessening competitive strength.

Here at Giddens & Gatton Law,amp; P.C., in Albuquerque, we represent businesses of all sizes and types, including small-, medium- and large-sized retail operations. Increasingly, retailers are feeling the squeeze of online competition and we are here to provide guidance and legal assistance. One approach some retailers are taking is to file for reorganization bankruptcy as a way to continue their enterprises, but unburden their businesses from expensive commercial leases they can no longer afford.

The Aerosoles example

An example in the news is the impending bankruptcy filing by the women’s comfort shoe seller Aerosoles Group, according to Reuters on September 14. Citing unnamed sources, the article says that the company’s plan is to “exit its unprofitable store leases …” and that the bankruptcy could be filed yet this month.

Aerosoles reportedly plans to reorganize its business in bankruptcy, rather than liquidate and close up shop. This means it will likely file a business reorganization via Chapter 11 of the U.S. Bankruptcy Code. According to the Reuters article, sources say the business plan is to reduce Aerosoles’ approximately 80 stores to about 20 nationally through the bankruptcy process.

Aerosoles’ bankruptcy follows on the heels of a Chapter 11 filing by Payless ShoeSource Inc., about which we have blogged here. Reuters reports that Payless’ bankruptcy concluded in August and involved “closing hundreds of stores.”

Legal guidance important

Any retailer in New Mexico with questions about bankruptcy or other ways of addressing debt or other problems with the bottom line should seek the advice of an experienced bankruptcy lawyer. Especially when leases are involved, to maintain bankruptcy protections the retailer should get specific advice about Chapter 11 requirements vis-à-vis ongoing lease payments. During the proceeding, the retailer will have to choose whether to assume or reject each lease. Assumption of the lease and continuing to do business on the associated premises will require specific actions on the part of the retailer in bankruptcy.