Dive Brief:
- In order to focus on profitability, retailer Showfields on Friday filed for Chapter 11 bankruptcy protection and will proceed under the Small Business Reorganization Act’s subchapter V, according to a press release the company shared with Retail Dive. Showfields has approximately $3,117.58 of cash on hand as of its petition date and has estimated liabilities between about $1 million and $10 million, according to court filings.
- Showfields was “plagued with lower than expected revenue streams” at its stores leading up to and during the COVID-19 pandemic due to low sales from the vendors and artists it showcased, per the court filings. The company entered into a loan agreement with the Small Business Administration, as well as agreements with debt financing company Pipe Technologies and Merchant Cash Advance companies to continue operating.
- The company has secured new financing to support its restructuring process, which includes a focus on its existing Washington, D.C., and Brooklyn, New York, stores. Showfields closed its NoHo district store in New York City last month and shut down its Miami location in July. The restructuring will allow it to “take control” of its finances and focus on growth, with the company noting that it is negotiating a potential expansion into Europe.
Dive Insight:
Showfields’ latest move to redirect the business comes amid rising bankruptcy rates in the U.S.
“It pains me to leave our NoHo and Miami stores but we see great things ahead,” CEO and co-founder Tal Nathanel said in a statement. “While it took us a few years to fine-tune, today we know the right economic structure for new locations, as we have shown in our newest stores. We remain dedicated to our mission of redefining the way people discover and experience retail.”
The department store company is using an aspect of the U.S. Bankruptcy Code that allows it to streamline processes and reduce costs, according to the U.S. Courts website. In order to file a subchapter V case, alongside other qualifying factors, the debtor must be operating a business with combined total secured and unsecured debts of $7.5 million or less.
Although retail stores began to reopen following the onset of COVID-19, Showfields did not see a corresponding increase in revenue at its stores, Nathanel said in a court filing. “As such, [Showfields] was increasingly unable to satisfy its additional debt service obligations to the SBA, Pipe, and the MCA Companies in a timely manner,” Nathanel said.
Through its agreement with Pipe, Showfields sold its accounts receivable and recurring revenues for $1.4 million of operating capital, per a filing. The retailer’s agreements with various MCA companies let them purchase about $941,400 in Showfields' future receivables for the price of $690,000.
Although Showfields felt the deals were necessary to continue operating its stores, its agreements with MCA companies proved to be “particularly detrimental” for Showfields. The deals allowed the MCA companies to make “substantial automatic withdrawals” from Showfields’ bank accounts to satisfy its obligations.
Showfields — which previously dubbed itself as “the most interesting store in the world” — focuses on selling a rotating mix of digitally native brands. Its NoHo store opened in 2019 and spanned 14,707 square feet across four floors. Both its Brooklyn and Washington, D.C., locations opened in the fourth quarter of 2022, with the latter location entailing a 10-year lease. Its Westfield Century City in Los Angeles remains open.
Chapter 11 filings from businesses have risen so far this year, up 61% year over year to 4,553 during the first nine months of 2023, according to Epiq Bankruptcy. During the same period, small business filings increased 41% to 1,419. A variety of other brands and retailers are at risk of filing for bankruptcy in the next 12 months, including Joann and The Container Store.
