Retailers Forecast Bankruptcy If Back-To-School Sales Fizzle

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Retailers Forecast Bankruptcy If Back-To-School Sales Fizzle by Chuck Tatelbaum, Tripp Scott

With the back to school selling season second only to the end of the year holiday season for many retailers, signs point to disappointing, if not disastrous, results for some retailers. This could be a foreboding signal that another wave of retail failures is forthcoming, says U.S. bankruptcy expert Chuck Tatelbaum.

Teen retailer Claire’s Stores needs a big sales lift from back-to-school or the business will likely go bankrupt, the New York Post reported Wednesday. Claire’s Stores, which has more than 3,000 retail outlets, announced recently that its overwhelming debt of $2.4 billion combined with a same store sales decline of 5% for the 10 weeks ending July 10 points to a possible bankruptcy filing, says Tatelbaum.

With many retailers burdened by high loan repayment obligations at a time when sales at some traditional brick and mortar stores are slowing, Tatelbaum says the downward spiral of a poor cash flow and the lack of credit for inventory replacement can foster a disaster.

He contends that the legal uncertainty concerning the validity of consignment sales raised during the Sports Authority bankruptcy case has further restricted the flow of goods to financially distressed retailers, at a time when bare shelves will further exacerbate their problems.

About Chuck Tatelbaum

Charles M. Tatelbaum is chair of the creditors’ rights and bankruptcy practice and partner at the Tripp Scott law firm in Florida.  He focuses his practice on bankruptcy and creditors’ rights issues, complex business litigation, Uniform Commercial Code transactions and lender liability litigation and other types of secured transactions, as well as domestic and international letters of credit.

He regularly represents secured and unsecured creditors in transactions and insolvency situations, creditors’ committees, and throughout the United States he represents business clients in complex business litigation, the defense of lender liability claims, all types of bankruptcy proceedings and products liability defense based on warranty. He also represents secured and unsecured creditors in distressed business transactions and litigation. He has also has represented clients in Chapter 9 municipal bankruptcy proceedings and Chapter 15 foreign bankruptcy proceedings.

As an example, he represented the major motor vehicle floor plan lender in the largest motor vehicle dealer bankruptcy in U.S. history, recovering more than $150 million, which constituted payment in full of principal, interest, attorney fees and costs. In that case, the court awarded a $300,000 substantial contribution fee to the represented lender. As another example, he has represented the lender in the worldwide bankruptcy proceeding of Saab Automobiles, and was able to obtain payment in full of all principal, interest and attorneys’ fees. As of a result of his prior work with the U.S. State Department in eastern Europe to develop bankruptcy laws in Croatia and Slovakia, Mr. Tatelbaum has regularly handled business and insolvency issues that develop in foreign countries.


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