Essential retailer closes more stores in Chapter 11 bankruptcy

According to The Street , When a company files for Chapter 11 bankruptcy, it places itself under the oversight of the court, its creditors, and its lenders. While some companies enter these proceedings with a clear strategy, things can quickly spiral out of control if any of these parties object to the plan. This is exactly what happened with Red Lobster during its recent bankruptcy filing.

When Red Lobster filed for Chapter 11, it immediately closed locations it deemed unprofitable. The company had hoped to renegotiate leases at over 100 other locations to lower rent costs and settle old debts. However, many landlords were unwilling to accept these terms, complicating the chain’s efforts to restructure. As a result, Red Lobster will likely close more locations than originally planned, and while it will survive under new ownership, it won’t be as large as it had hoped.

Similarly, Rite Aid faced its own challenges after filing for Chapter 11 bankruptcy protection in October 2023. The company announced that it would “optimize its store footprint,” a euphemism for closing hundreds of underperforming stores. Rite Aid was leveraging its bankruptcy filing to renegotiate leases with landlords, but the company never disclosed an exact number of planned closures. Real estate experts, like Garrick Brown from Gallelli Real Estate, estimated that up to 700 stores might close, or about a third of Rite Aid’s 2,215 locations at the time.

As of now, Rite Aid has nearly reached that worst-case scenario, closing 694 stores since the filing. Along with these closures, Rite Aid has also faced a significant data breach. Despite being in bankruptcy and dealing with financial difficulties, the company revealed that on June 6, 2024, a third-party hacker impersonated an employee to gain access to certain business systems. This breach compromised customer data, including names, addresses, dates of birth, and driver’s license numbers from purchases made between June 2017 and July 2018. However, Rite Aid emphasized that no financial, social security, or patient information was exposed.

The company has notified affected customers and is working with law enforcement and regulators to investigate and resolve the breach. Despite the bad news, Rite Aid continues to move forward with its restructuring efforts, trying to stabilize its business after a difficult year.