ShopKo Files For Chapter 11 Bankruptcy

Another icon of the Wisconsin retail world has filed for bankruptcy. Shopko is closing about two-thirds of its retail locations in the coming months, including more than forty stores in Wisconsin as it attempts to re-tool and re-shape itself in Chapter 11 bankruptcy.

Another One Bites The Dust

Shopko is the latest Wisconsin retailer to seek bankruptcy protection in light of changing consumer shopping habits. The Green Bay based big box store has a sizeable footprint in the Great Lakes, Midwest, and Pacific Northwest, but it could not compete with larger chains like Walmart and Target or online shopping trends.

Between now and mid-May, the company will shutter around 70 percent of its existing locations, and hope that its smaller footprint will help it attract a buyer. The company originally planned to close only 39 stores, but the list of closers has steadily increased.

However, some locations will see a stand-alone ShopKo branded optical centers open in the coming months. It is this focus on small locations that may prove the company’s saving grace. Reports indicate that the chain’s most profitable locations were sites with pharmacies and eye doctors and stores in small towns where larger competitors cannot build at their typical scale.

The company’s profitable pharmacy business has already been sold off, mostly to competitors.

Down But Not Out

Shopko’s decision to file for Chapter 11 rather than Chapter 7 bankruptcy is a common one. Businesses and business owners would typically rather salvage something than walk away with nothing.

The Chapter 11 process allows the business to focus on finding and exploiting its core competencies while closing up or selling off less profitable or peripheral enterprises. Debts can also be renegotiated or shifted around much more easily. It can be a hopeful or even joyful experience because it liberates businesses to try something new in a way that would not otherwise be possible.

Hopefully Shopko will come through the Chapter 11 process with a renewed sense of purpose, a strategy for success, as well as a more manageable debt load. If it doesn’t, the Chapter 11 case may be converted to a Chapter 7 case.

In a Chapter 7 case, the assets held by a company are liquidated, the creditors take whatever they can get, and the business is wound down. A recent example of a business that had to convert its Chapter 11 reorganization into a Chapter 7 liquidation is Toys R Us. It simply could not find a path to profitability or a buyer, so it no longer exists.

Don’t Wait Until It’s Too Late

If your company is having financial difficulties or is teetering on the brink of bankruptcy, it’s time to talk to an experienced bankruptcy attorney. The longer you delay, the more limited your options will be. Taking steps to avoid bankruptcy, or choosing to file for Chapter 11 rather than Chapter 7 is only possible if you are proactive.