Aldo Files For Bankruptcy As The Pandemic Hits Businesses Hard. But Don’t Worry, You Can Still Buy Your Favourite Pair Of Heels
A pandemic is one of the worst disasters and it has shut down the entire world all at once. If it was a couple of countries, the world could have sent help but what do you do when every country is busy saving themselves? This has led to a huge impact on the global economy, and now it is affecting the personal finances of people.
Several businesses that were already in debt are now fearing a collapse because the cash flow has either ceased or slowed down considerably. Just within the past couple of weeks, we heard luxury retailer Neiman Marcus, J. Crew, and fitness chain Gold’s Gym file for bankruptcy. Now, it’s the footwear and other accessories retailer Aldo Group Inc. that has filed for Chapter 11 bankruptcy protection in Virginia.
The Montreal-based company’s pre-bankruptcy debt includes $300 million that matures in October 2022. However, since the brand had to shut stores courtesy COVID-19, the cash flow has stopped, tightening the pressure on it. Aldo has around 3,000 stores worldwide and maintaining those with no or minimal sales have worsened the situation.
“ALDO is one of the world’s leading fashion footwear and accessory brands with a solid track record of growth and profitability for almost half a century. It is no secret that the retail industry has experienced rapid and significant change over the last several years,” said Aldo CEO David Bensadoun in a statement. He further added, “We were making strong progress with the transformation of our business to tackle these challenges; however, the impact of the COVID-19 pandemic has put too much pressure on our business and our cash flows.”
However, filing for bankruptcy doesn’t mean all’s lost. For the uninitiated, filing for bankruptcy protection under Chapter 11 “generally provides for reorganization, usually involving a corporation or partnership. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11,” reveals the US Courts’ official website. While J. Crew is intending to open its stores once the lockdown is lifted, Gold’s Gym has shutdown 30 gyms as part of its restructuring move.
During this time, a retailer has to reveal everything about his business, sales, and even how much they are paying the lawyers. However, filing for a Chapter 11 bankruptcy doesn’t mean that the stores will shut down. Once the lockdown is lifted, Aldo is all set to start operations again and meanwhile, is selling online.
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Chapter 11 bankruptcy protection allows you to run your company and do damage control in order to repay your debts. Chapter 7 bankruptcy, however, is when a company has to sell itself or its assets in order to pay the debts. So, things aren’t so bad yet.
Meanwhile, Aldo’s India operations won’t likely be affected, revealed Major Brands India, the franchise that sells the brand. “We have a long-standing association with Aldo Group International and share a strong relation with them,” said Tushar Ved, President, Major Brands (India) as reported by CNBC TV18. “We don’t see this transition affecting India operations in any way. We launched the first ever Aldo store in India, in Mumbai, way back in the year 2005 and since then the brand has expanded to every major city in the country,” he further added.
In a statement to its franchises, Aldo clarified that the bankruptcy was filled “to restructure and reach a settlement with its creditors with a view to continue as a going concern without interruption.” It further added, “The protection afforded by the reorganization proceedings will allow the retail organization to “right-size” our owned and operated brick and mortar business, while enabling us to confidently supply our franchisee partners without disruption,” the group said in a statement.”
These are tough times as companies are trying hard to sustain. Fitness chains, fashion and beauty industry, wedding industry, cab services, etc are going to suffer majorly in this pandemic because these services aren’t essential and/or pose a risk to the spread of the virus. Meanwhile, small businesses that do not have that many assets or a huge fund are at the risk of collapsing.