This Deep Discounter Might Be Knocking on Bankruptcy’s Door
Forman Mills could be the next retailer to find itself in bankruptcy court just days after facing a class-action lawsuit over how it laid off more than 100 corporate employees.
The off-price warehouse-style fashion retailer has warned that it is on the brink of a Chapter 11 filing if it can’t find a buyer.
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WARN (Worker Adjustment and Retraining Notification) notices have been filed in Wisconsin and Pennsylvania. Forman Mills’ chief financial officer Kevin Hess said the company is “underway with efforts to accomplish a sale as a going concern,” according to June 12 Wisconsin notice. He said the company would have to file for bankruptcy if it can’t find a buyer.
Workers in Wisconsin were notified on June 5. That location would likely shut down permanently 60 days after the June 5 notice, Hess added. “We anticipate that [the employee] separations will be permanent,” Hess said. The closure would cut 33 store jobs.
The notice filed in Pennsylvania said 245 employees at seven store will be out of a job on Aug. 4, 2023. Additional store closures are expected in Delaware, Illinois, Maryland, Michigan, New Jersey and Ohio, although it appears that WARN notices have yet to be filed in those states.
The retailer earlier this month laid off 119 staff members at its New Jersey headquarters, prompting one terminated employee to sue claiming Forman Mills failed to provide adequate notice. State law requires 90 days notice when a company lays off at least 100. The lawsuit is asking the retailer to fork over severance pay.
There’s a chance Forman Mills could find someone interested in its IP once it’s bankrupt. That’s what happened to Bed Bath & Beyond, which just agreed to sell its best bits to Overstock.com for $21.5 million. An auction for Buybuy Baby is scheduled for Wednesday.
Forman sells men’s, women’s and kids’ apparel and accessories at deep discount, acquiring merchandise via closeouts or through surplus availability when manufacturers are stuck with canceled orders. It also sells toys and home goods. Founder Rick Forman opened the first Forman Mills Clothing store in 1981, and Its first warehouse store opened in 1985, according to the company website. The company was sold to private equity firm Goode Partners LLC, which has also invested in Intermix, in Oct. 2016.
Rising inflation is putting a damper on consumer spending. Some people who shop higher-end retailers are believed to be in the early stages of trading down to the off-price sector. But the problem for discount retailers is that their customers are usually the least prepared to absorb higher prices. How it will all shake out depends on labor trends. Economists have said that consumer spending could stabilize as long as people have jobs and aren’t worried about making ends meet. But that might not help apparel and footwear. A report from Coresight Research predicted that consumer spending on apparel and footwear could “fade away” this year.
