Two national retail chains that have major operations in the Philadelphia area and faced stiff competition from cheaper Chinese imports sold online now look as if they will survive under new owners after filing for bankruptcy protection from their creditors last fall, as the retail industry struggles to keep stores relevant in the face of internet and global competition.
David’s Bridal, the Conshohocken-based chain of 300 stores, says it has completed its restructuring and exited Chapter 11 bankruptcy under chief executive Scott Key, with increased ownership by creditors led by Bank of America Corp.
Despite the reorganization, which began in November, Key said in a statement that “dresses arrived on time, stores remained open.” He promised lower prices in stores and online, more styles and sizes, free Blueprint Registry services, and more live wedding-planning events in stores to boost sales.
“The David’s Bridal stock went to the pre-petition term-loan lenders [led by Bank of America], the holders of unsecured notes claims, and the lenders under the exit facility," said Ted Gavin, managing partner of Wilmington bankruptcy consulting firm Gavin/Solmonese. "The identities of the actual parties aren’t disclosed in the plan or disclosure statement.”
David’s Bridal has said its reorganization plan cut debt by $450 million while giving suppliers and creditors more control over the company, whose cash position had deteriorated since its 2012 acquisition by private-equity investor Clayton, Dubilier & Rice. That buyer had said it had plans for expansion in the United States and abroad, but a continued drop in weddings in its home market, and rising competition from China-based internet dress retailers -- plus the owner’s and lenders' cash demands -- hurt the company’s profitability.
Separately, court records show a U.S. unit of Amsterdam-based Head, which makes skiing, tennis and swimming equipment, has agreed to purchase Advance Sports Enterprise, the bicycle importing and retail company, headed by Patrick Cunnane, that filed for bankruptcy protection in November, the week after Cunnane’s wife, Madeleine Dean, was elected (D-Pa.) to represent Montgomery County in Congress.
Bicycle Reporter and Industry News cited industry sources confirming the buyers agreed to pay $22 million at Wednesday’s bankruptcy auction. Advanced Sports officials declined to comment pending bankruptcy court approval of the sale, which is expected at a hearing in Durham, N.C., on Tuesday.
Advanced is based in Durham, and has a warehouse and offices in Northeast Philadelphia. Rep. Dean listed Advanced Sports and related investments as her family’s largest asset in her campaign finance papers.
The reported sale price is a fraction of the $100 million-plus in debt to Taiwan-based suppliers of Advanced’s mostly China-built bikes, Canadian pension investors, and other creditors whom Cunnane named in a petition when his firm filed for bankruptcy in November.
The company’s Performance bike stores in Paoli, Philadelphia, and 100 other cities have been holding going-out-of-business sales since shortly after the bankruptcy filing.
But Cunnane has said he hopes the stores and warehouses will remain open and most of his company’s and affiliates' nearly 2,000 employees will keep their jobs.
Cunnane and Dean have each challenged President Donald Trump’s import tariffs and other policies designed to limit U.S. imports from China and strengthen U.S. manufacturing.
In testimony before a federal trade agency last year, Cunnane said the effect of the policy would likely not be to boost U.S. bike and accessories manufacturing -- Trump’s stated goal in taxing U.S. imports of Chinese goods -- but would instead shift U.S.imports away from China and toward smaller countries where manufacturing wages are even lower, such as Vietnam -- while also boosting U.S. retail prices.
Cunnane cheered a later action by the Trump administration that had the effect of making it more expensive for consumers to buy bikes directly from Chinese websites, similar to the direct China sales sites that have stiffened competition for David’s Bridal.