It has been a challenging year for several well-known U.S. retailers and businesses. With the economy recovering from the effects of the Covid-19 pandemic, companies grappled with a range of issues stemming from elevated costs, supply shortages, and increased competition. Consequently, a number of major names found themselves filing for bankruptcy in 2023.
Declaring bankruptcy doesn't always signify the demise of a business. Many U.S. businesses file for bankruptcy to streamline operations, reduce debt, and cut costs. A frequently chosen option is Chapter 11 bankruptcy, providing companies the opportunity to address financial challenges through reorganization.
WeWork
In 2023, WeWork experienced a tumultuous journey. Once hailed as the nation's most valuable startup, the company appeared poised to revolutionize the American work landscape. Some liken its rapid ascent and subsequent high-profile downfall to the debacles of the Fyre Festival and FTX.
In November, the beleaguered coworking-space company filed for Chapter 11 bankruptcy, a move that didn't come as much of a surprise. The preceding month, WeWork had acknowledged financial struggles exacerbated by the pandemic's impact on its core business, especially as more individuals adopted remote work.
However, WeWork's unraveling began well before the onset of Covid-19. A failed IPO attempt in 2019 exposed significant losses and potential conflicts of interest involving the company's co-founder and then-CEO, Adam Neumann. Neumann's unconventional leadership style, extensively covered in the news and a Hulu documentary, led to his ousting in 2019, further contributing to the company's challenges.
WeWork has announced its intention to stay open and functional while undergoing negotiations to reevaluate its leases and address debt obligations.
Rite Aid
Following a series of challenges within the drugstore industry, Rite Aid took the step of filing for Chapter 11 bankruptcy in October.
Similar to CVS and Walgreens, Rite Aid faced substantial legal costs related to allegations of illegitimate opioid prescriptions. However, unlike its competitors, Rite Aid found itself unable to overcome escalating debts, leading to financial struggles.
The company also grappled with fierce competition from retail giants like Amazon, Walmart, Target, and Costco, which offered more customer-friendly alternatives to the traditional nationwide pharmacy chains.
In an October SEC filing, Rite Aid projected significant increases in losses, adding to the three-quarters of a billion dollars lost between March 2022 and March 2023, along with an additional $307 million expected between March and May of the current year.
To navigate through bankruptcy, Rite Aid secured $3.5 billion in financing and debt reduction agreements from lenders. The company outlined plans to expedite store closures, divest certain businesses, including prescription benefit provider Elixir Solutions, and welcomed a new CEO.
Rite Aid specifically pointed to rising theft as a factor in the decision to close some of its stores.
Bed Bath & Beyond
In a protracted journey that culminated in its demise this year, the all-encompassing store filed for bankruptcy in April. It shuttered its remaining 360 stores and an additional 120 buybuy BABY locations, marking one of the most significant retail bankruptcies in recent years.
However, the renowned blue logo is still present. Overstock.com acquired the brand during bankruptcy and rebranded its own platform as BedBathandBeyond.com.
This strategic move fused Overstock's online business model and product categories with the well-loved branded items preferred by Bed Bath & Beyond customers.
The revival of Bed Bath & Beyond's iconic 20%-off single item "Big Blue" coupon is noteworthy, though its usage is restricted to online purchases.
The company had been engaged in cost-saving measures for an extended period. Earlier in 2023, it announced the closure of approximately 400 locations while retaining profitable stores in key markets. Additionally, the company attempted to reduce costs by forgoing severance payments to some laid-off workers at closing stores.
Tuesday Morning
Another casualty in the home goods retail sector for 2023 was Tuesday Morning, which sought refuge in Chapter 11 bankruptcy in February due to its "exceedingly burdensome debt." This marked its second bankruptcy filing within a span of three years.
In May, the company declared its closure and liquidation, shutting down all 200 of its stores.
The initial bankruptcy occurred in May 2020, amidst the peak of the pandemic, as prolonged store closures presented an "insurmountable financial hurdle." Just three years prior, it had boasted 700 locations. The prospects dimmed for the party supply store when it initiated bankruptcy proceedings in January 2023, grappling with intense competition and a track record of financial losses. In a regulatory filing, the company disclosed an agreement with debtholders to alleviate its $1.7 billion debt burden.
Party City
In 2023, the largest party supplier in America sought bankruptcy protection, citing challenges from big-box retailer competition, increased costs amid the pandemic, and a shortage of helium.
Nevertheless, in September, the retailer successfully emerged from bankruptcy after a U.S. judge approved its reorganization plans.
The approved plan alleviates Party City of nearly $1 billion in debt. Although some of the nearly 800 Party City stores in the U.S. are slated for closure as part of the bankruptcy agreement, the majority are expected to remain operational, as stated by the company.
SmileDirectClub
The telehealth orthodontics firm ceased operations in December, shutting down less than three months after initiating Chapter 11 bankruptcy proceedings.
Specializing in teeth aligners, with the standard treatment duration ranging from 4-6 months, the company advised customers in the midst of their treatment to seek guidance from local dental offices.
Founded in 2014, SmileDirectClub had initially positioned itself as a cost-effective alternative to traditional orthodontics, aiming to "democratize access to a smile each and every person loves by making it affordable and convenient for everyone."
In a released statement, the company expressed that the restructuring would enable SmileDirectClub to flourish as a global leader in oral care for years to come. It underscored its commitment to providing affordable and accessible oral care to customers without any disruption.
Lordstown Motors
In June, the electric vehicle manufacturer filed for Chapter 11 bankruptcy protection and initiated the process of selling itself.
Concurrently, the company unveiled a legal action against Foxconn, its largest shareholder and former partner, alleging a deliberate effort to "destroy" its business.
In an official statement, the company expressed that it had no alternative after a prominent collaboration with Foxconn, one of the world’s largest electronics manufacturers, disintegrated. The company accused Foxconn of fraud and failing to fulfill commitments to invest in the business.
Named after its industrial Ohio location, Lordstown served as a vital economic contributor to the local community. It acquired its factory from GM in 2019 to manufacture small cars for America's leading automaker. Initially employing 1,600 individuals, by the close of 2022, it retained only 260 full-time employees. In 2021, just a few years after its launch, the company issued a warning about the possibility of going out of business.
