Coronavirus Market Volatility Causes Modell’s to Delay Chapter 11 Process

Similar to XPO Logistics’ decision to postpone its exploration of divesting assets due to current market uncertainty caused by coronavirus, a bankruptcy court judge has granted a 45-day stay on the Chapter 11 filing of sporting goods retailer Modell’s due to the ongoing crisis and its impact on closing sales.

The decision also leaves the door open for Modell’s to petition the court for a further extension, should conditions warrant. The company had sought a suspension of the filing for 60 days.

“The unprecedented, exponential spread of coronavirus disease COVID-19 throughout the United States over the course of the last week, along with the resulting state-imposed limitations and prohibitions on non-essential retail operations, has forced (Modell’s) to re-evaluate the short-term trajectory of their Chapter 11 cases,” the company said in its application for a postponement. “Notwithstanding (Modell’s) best-laid plans, COVID-19 has prevented (Modell’s) from conducting the robust liquidation sales that seemed possible just one week ago.”

Modell’s told the court it had suspended all operations, including its 134 retail stores in the Northeast, fulfillment of ecommerce orders, termination of store and distribution center employees and retention of just a “skeleton crew of essential employees” in its offices in New York.

The company plans to restart the bankruptcy process once the coronavirus crisis abates. “We believe that the breathing spell provided by the bankruptcy suspension is in the best interests of their estates and all creditors as it will allow (Modell’s), in time, to maximize the value of their inventory and leasehold interests.”

“The most important thing to me right now is the preservation of as many union jobs as possible” CEO Mitch Modell told Fox earlier in March, while noting the retailer was still talking with potential partners. Modell’s has 2,900 employees.

In a February interview, Modell told the New York Post that “lousy” local sports teams negatively impacted the sales of jerseys, while also citing the shortened 2018 holiday shopping season and the mild winter’s impact on sales of outerwear.

Modell’s retains hope that JackRabbit, the Denver-based sportswear retailer that bought Olympia sports brand last year, will buy it out of Chapter 11, according to the Post.