The Children’s Place is buying the rights to the Gymboree and Crazy 8 brands from bankrupt clothing retailer Gymboree Group for $76 million, and Gap Inc. is shelling out $35 million for the company's upscale Janie and Jack line and other assets. The results of an auction for Gymboree’s assets were released Saturday by the bankruptcy court of the eastern district of Virginia, Richmond division. The court still needs to approve both transactions.
The Children’s Place will also “take over a contract with Singapore-based Zeavion Holding. In 2016, Zeavion acquired the retailer’s Gymboree Play & Music business, which operates independently,” writes CNBC’s Christina Cheddar Berk.
Gymboree Play & Music, an early childhood development program established in 1976 as Kindergym by a California mom, Joan Barnes, has more than 730 franchised and company-owned centers in the U.S. and 40 other countries, according to its website.
“Meanwhile, Gap, which announced on Thursday plans to split into two separate companies, said it will buy Janie and Jack’s intellectual property, its website, customer data and other assets for $35 million. In a separate deal, it also plans to buy the chain’s inventory from a liquidation company,” CNBC’s Cheddar Berk continues.
“The purchases make sense for Children’s Place and Gap because the kids' clothing market is booming. It grew more than 4% last year,” Julia Horowitz writes for CNN Business.
“Many parents are choosing to have children later in life, which means they have more disposable income to spend on their kids' wardrobes, according to Ayako Homma, an analyst who tracks the children's clothing market at Euromonitor International,” Horowitz continues.
“Gap’s decision to scoop up Janie and Jack also indicates that the company plans to build out its brand portfolio on the heels of the Old Navy spinoff,” she adds. “Children's Place … is pursuing a turnaround by pushing online sales and courting millennial moms.”
San Francisco-based Gymboree “first filed for bankruptcy protection back in June 2017, weighed down by more than $1 billion in debt stemming from a leveraged buyout by Bain Capital Private Equity LP in 2010. The company was able to slash $900 million in debt from its balance sheet and turned over control to its lenders, including Brigade Capital Management LP and Oppenheimer Funds Inc.,” Becky Yerak reports for the Wall Street Journal, adding that it had more than 1,280 stores at the time and immediately closed 375.
It again filed for bankruptcy in January.
“None of the retailers released public statements about the deal, but Gymboree Group CEO Shaz Kahng wrote customers a note on the retailer’s website last month in announcing the most recent bankruptcy filing. The website is advertising massive discounts on all its merchandise, Theresa Braine writes for the New York Daily News.
“This is a heartbreaking outcome for our many dedicated employees and our treasured customers with whom we have built many strong relationships over the past four decades,” Kahng wrote.
Meanwhile, Gap is separating Old Navy from Gap, Banana Republic, Athleta, Intermix and Hill City.
“It’s clear that Old Navy’s business model and customers have increasingly diverged from our specialty brands over time, and each company now requires a different strategy to thrive moving forward,” Gap Inc. board chairman Robert Fisher said in a statement last week.
“Gap’s decision to spin off Old Navy could cause a wave of retailers to follow suit,” reads a headline atop Rebecca Ungarino’s analysis for Business Insider. “Overall, the retail industry has gone through transformational change,” Dana Telsey, CEO and chief research officer of Telsey Advisory Group, tells her.
“She pointed to VF Corp.’s decision last summer to spin off its Lee and Wrangler denim brands into a separate public company. The announcement came as some of its other brands, like Vans and The North Face, were generating more sales than VF Corp.'s denim businesses.
“The idea is that other retailers, particularly apparel manufacturers, could increasingly look to restructure amid changing consumer tastes and a broader shift to e-commerce. Traditional retailers are ‘cleaning up the physical base, and enhancing their omnichannel presence,’ Telsey said,” Ungarino writes.
That’s omni as is “all in,” right?