Gymboree Pins Post Bankruptcy Comeback Hopes on Better Merchandise

July 16, 2018, 11:36 PM UTC

Less than a year after emerging from bankruptcy protection, Gymboree has a plan it hopes will land it back in shoppers’ good graces in the very thought children’s apparel market.

The company, which filed for Chapter 11 bankruptcy protection in June 2017, thinks that better quality merchandise and products that lend themselves to mixing and matching, rather than constituting a whole outfit, will help it get back to strength.

At the time of the bankruptcy, Gymboree Group, which also includes the Janie and Jack and Crazy 8 chains, was choking on debt of $1.34 billion, roughly on par with its annual sales volume, resulting from a 2010 leverage buyout by private equity firm Bain Capital. That handcuffed Gymboree as it tried to keep up with competitors in terms of store upgrades, supply chain improvements, and the growth of e-commerce.

What’s more, Gymboree’s merchandise grew stale and outdated, concedes CEO Daniel Griesemer, who took the reins shortly before the Chapter 11 filing.

“Millennial parents want quality, mix-and-match-ability, an elevated esthetic,” Griesemer said in an interview on Monday at Fortune offices. “This modern parent learned to shop at H&M, Zara and Forever 21, a completely different way of bringing together disparate pieces and making their own look.” Griesemer also wants to reduce the focus on discounting with better quality and a more selective assortment.

During its bankruptcy, the company closed 360 stores, leaving it with 940 remaining across its different banners now. That includes some 380 Gymboree locations in the U.S. and Canada. With fewer stores to run, and less debt to service—Gymboree shed $900 million in debt during its restructuring—the company has more money to update its stores, including a new prototype it unveiled last weekend in Manhattan and in Torrance, Calif.

The company is also investing in an improved e-commerce site and launching a mobile shopping app, features that are basics for any retailer now.

Still, Gymboree is facing as competitive a market for kids’ clothing as ever. The Children’s Place (PLCE) is doing great business. Target (TGT) is enjoying a huge success with its Cat & Jack line of kids’ apparel, while Walmart (WMT) has vastly improved its own fashion offerings. Department stores like J.C. Penney (JCP) and Kohl’s (KSS) have also put a lot effort into their house brands and despite that are seeing middling results. Griesemer, a former senior executive at Gap Inc (GPS), also faces stiff competition from his alma mater’s The Gap and Old Navy chains.

What’s more, few retailers that emerge from bankruptcy protection go on to stage lasting comebacks. Think of Borders, Toys ‘R’ Us and The Sports Authority.

But as a private company, owned by former lenders such as Oppenheimer, Searchlight Capital and Brigade Capital, among others, Gymboree will at least get more breathing room than it would get as a publicly traded company, spared from quarterly reports. Indeed, Griesemer wouldn’t say whether Gymboree’s comparable sales were rising or falling. Griesemer says Gymboree’s owners understand the need for patience.

“The turnaround of a brand takes a long time, it’s not something that happens overnight,” he said. “We have owners that recognize this.”

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.

Read More

Great ResignationInflationSupply ChainsLeadership