BIG NEWS: Essential retailer closes more stores in Chapter 11 bankruptcy
When a company files for Chapter 11 bankruptcy, it surrenders to the scrutiny of the court, its lenders, and creditors. While a clear restructuring plan may be in place, objections from any of these parties can quickly turn a controlled situation into chaos.
Red Lobster’s Restructuring Struggles
This was evident in the recent Chapter 11 filing by Red Lobster. The restaurant chain swiftly closed locations it deemed unprofitable at the time of its filing. The company’s strategy included renegotiating leases at over 100 other locations to secure lower monthly rates and address back rent. However, many landlords were reluctant to accept these proposals, hindering Red Lobster’s plans.
As a result, while the chain will continue under new ownership, it is poised to close more locations than initially anticipated, limiting its potential recovery.
Rite Aid Approaches a Crisis Point
Rite Aid (RAD) found itself in a precarious position after filing for Chapter 11 bankruptcy protection in October 2023, announcing plans to “optimize the company’s store footprint.” This euphemistic phrase indicated an impending wave of store closures.
The company stated, “Rite Aid regularly evaluates its store portfolio to ensure it is operating efficiently while meeting the needs of its customers, communities, and associates.” In conjunction with its court-supervised restructuring, Rite Aid aimed to assess and close additional underperforming stores to lower rent expenses and bolster financial performance.
While Rite Aid did not disclose an exact number of expected closures, Garrick Brown, VP of Real Estate Intelligence for Gallelli Real Estate, predicted that “worst-case scenario could be 700 stores closed.” This would equate to nearly one-third of Rite Aid’s total 2,215 locations.
Since its bankruptcy filing, Rite Aid has closed 694 stores, drawing alarmingly close to that grim forecast.
Data Breach Complicates Matters
To make matters worse, Rite Aid had to confront a significant data breach shortly after its bankruptcy filing, further complicating its situation.
On June 6, 2024, an unknown third party impersonated a company employee to gain unauthorized access to business systems. Rite Aid detected the breach within 12 hours and initiated an investigation to contain the incident.
In a statement, the company disclosed, “We reported the incident to law enforcement and federal and state regulators.” They subsequently notified customers whose data may have been compromised.
By June 17, 2024, it was determined that the breach involved personal data linked to purchases made between June 6, 2017, and July 30, 2018. Affected information included names, addresses, dates of birth, and government-issued IDs. Importantly, no social security numbers or financial information were compromised.
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