Shopko has filed for Chapter 11 bankruptcy protection as part of a reorganization plan. The retailer, already in the process of closing more than 60 stores, revealed 38 additional store closures with its bankruptcy announcement. Shopko did not confirm how many of its 18,000 employees may be affected by the closures.
The retailer has until March 14 to reorganize or it must liquidate its assets, according to bankruptcy court documents.
The company is relocating more than 20 Shopko Optical centers to freestanding locations and conducting an auction process for its pharmacy business. All pharmacies will remain open throughout this process.
Shopko has obtained up to $480 million in debtor-in-possession (DIP) financing from some of its lenders, led by Wells Fargo, to help fund and protect its operations during the Chapter 11 process.
In early December 2018, Bloomberg reported that Shopko might pursue court protection from creditors after efforts to find a buyer stalled. Shopko currently has four loans with a combined outstanding balance of $439.8 million. All are due by 2020.
“This decision is a difficult, but necessary one,” said Russ Steinhorst, CEO of Shopko in a statement. “In a challenging retail environment, we have had to make some very tough choices, but we are confident that by operating a smaller and more focused store footprint, we will be able to build a stronger Shopko that will better serve our customers, vendors, employees and other stakeholders through this process.”
The filing comes after a 12-month period of serious challenges for Shopko, including:
- A $35 million loan from its main landlord;
- The closure of at least 45 stores;
- Pharmaceutical supplier McKesson Corp.’s lawsuit over $67 million in unpaid bills; and
- The sale of select pharmacy operations to Kroger, Hy-Vee and CVS in the last 60 days.
Sun Capital Partners, a private equity firm, acquired Shopko for approximately $1.1 billion in 2005. The Green Bay, Wisc.-based retailer presently operates 363 stores in 24 states under varying formats (including Shopko, Hometown, Shopko Express and Shopko Optical), according to its web site.