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Gymboree to shutter Crazy 8 stores amid 'strategic review'

Dive Brief:

  • Gymboree announced Wednesday it has begun a "comprehensive review of strategic options," which could include a sale or "other transactions" for its Gymboree, Janie and Jack, and Crazy 8 brands, according to a company press release.

  • The children's retailer said in the release that it plans to close all of its Crazy 8 locations and is "significantly reducing" the number of Gymboree locations in 2019, though for now all of the retailer's locations remain open. The company also announced that a new CEO for Gymboree Group, Shaz Kahng, started Nov. 14.

  • This announcement comes barely a week after a Reuters report claimed the children's retailer could file for bankruptcy for a second time and shutter half of its 900 stores in the process. Gymboree did not immediately respond to Retail Dive's request for comment.

Dive Insight:

The playground has been rough for Gymboree lately. The children's retailer exited bankruptcy in October 2017, marking just over a year before rumors of a Chapter 22 started cropping up.

While the retailer did not name bankruptcy as one of its strategic alternatives, many of the steps it's taking sound familiar in that process: namely, evaluating the company's brick-and-mortar footprint, considering the sale of brands and shuttering Crazy 8 stores. That's a move many expected the retailer to pursue in its first Chapter 11.

According to analysts at the time, one of Gymboree's main struggles was a collection of brands that were cannibalizing each other, and yet the company didn't drop the lower-priced Crazy 8 brand, but continued to operate all of its brands after exiting bankruptcy. The move isn't unusual for retailers going through tough times; Nine West divested itself of its namesake and Bandolino brands in a bankruptcy auction in July.

Since then, Gymboree hasn't seen glowing success. Even with the bankruptcy of Toys R Us potentially opening up more market share in the children's space, the retailer is being preyed upon by competitors.

The Children's Place in particular has made it clear that the company plans to take advantage of Gymboree's misfortune. In August, the retailer reported a 20% net sales spike, and CEO Jane Elfers indicated that the company was not done finishing off its rivals. Elfers noted that the company was planning to "aggressively pursue market share" from Gymboree in areas where the stores overlapped, and added that The Children's Place was "successfully targeting their customers."

According to Kahng, Gymboree's strategic review will create a "more streamlined organization" that can deliver "enhanced, long-term value" to shareholders. "The process we announced today is designed to reposition the company for success by establishing a brand portfolio and store footprint that is optimized for the current retail environment," Kahng said in a statement. "These strategic initiatives are an important next step as we continue to look for ways to unlock additional value in our brands."

As initially reported by Reuters, Gymboree has hired Berkeley Research Group and Stifel as the company's financial advisors.

#Gymboree #Crazy8 #ClosingStores

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