Gymboree, a rare retailer to emerge from bankruptcy last year, launches its reboot on Amazon Prime Day

  • Gymboree is a rare example of a retailer that filed for bankruptcy last year and was able to reorganize its business successfully.
  • Emerging from bankruptcy, doesn't guarantee its success.
  • The retailer plans to focus on improving the quality and value of its clothing.
Pedestrians walk past a Gymboree store in San Francisco, California.
David Paul Morris | Bloomberg | Getty Images
Pedestrians walk past a Gymboree store in San Francisco, California.

Amazon has changed consumer expectations for shipping and service, and that has been one of the reasons retailers are going through dramatic transformations trying to keep up.

It makes the beginning of Amazon Prime Day strange timing for recently bankrupt Gymboree to choose for its brand refresh, but that’s exactly what the children’s retailer is doing.

“It’s really an all-new Gymboree, different in almost every single way,” Gymboree Group Chief Executive Daniel Griesemer told CNBC, speaking about the 32-year-old retailer. “The product is completely re-engineered, redesigned. [there’s] elevated quality, elevated aesthetic, the new mix-and-match capability, that hasn’t been part of the offering to date.”

Gymboree Group is the parent company of kids clothing brands Gymboree, Janie and Jack, and Crazy 8. It filed for chapter 11 bankruptcy on June 11, 2017, and officially re-emerged on Sept. 29, 2017.

Monday, Gymboree is announcing its refreshed personality, product and digital presence. The retailer relaunched its websites and is debuting a new app this week with augmented reality features. In taking these steps, Gymboree hopes its makeover will fix some of the reasons it struggled: growing online competition, a debt-laden balance sheet and a need to woo shoppers with better value.

A quarter of Gymboree’s sales come from its websites, and the retailer is offering as much as 80 percent off on its three brands’ sites, coinciding with Amazon Prime Day.

But the executive insists stores are still important to shoppers. In focus groups, shoppers explained that while they do a lot of shopping online, “they prefer to shop in stores, because they want to touch and feel and look at quality and sizing,” he said. That's why Gymboree is making certain to refresh its stores along with its e-commerce experience.

Gymboree Group closed more than 360 stores during its restructuring, leaving about 940 stores total for three brands in the U.S. and Canada.

Gymboree Group store count

  • Gymboree U.S. (331 stores)
  • Gymboree Canada (49)
  • Gymboree Outlet (155)
  • Crazy 8 (265)
  • Janie and Jack (139)

Source: Gymboree Group

Griesemer acknowledged the possibility of more store closures, noting he expects retail will see more “parity” between physical and digital over time, as more sales shift online. “But we have so much work to be done in the fleet of existing stores.”

In the bankruptcy court documents, James Mesterharm, Gymboree’s chief restructuring officer from retail consultancy and financial restructuring advisory firm AlixPartners, said the retailer was hurt by lower-cost competition from rivals Children’s Place and Gap, which both had less debt financing than Gymboree.

But Griesemer said it did not ultimately lower pricing.

“We’ve pretty much held the initial retail [pricing] on the product. Our desire is to provide better value,” Griesemer said.

Gymboree held focus groups in stores and in shoppers’ homes to figure out exactly what was most important to parents when making decisions about their children’s clothing.

“Price is only one component of value, and she is looking for value across the board and that includes the ability to have it laundered many times, and still keep its color and shape, durability and to be able to use it in different ways,” Greiesmer said.

It did, however, substantially lower its debt.

At the time of filing, Gymboree Group owed $1.364 billion and had assets of $755 million. During restructuring, it eliminated $900 million in debt.

Private equity firm Bain Capital bought Gymboree Group in 2010 for $1.8 billion, saddling it with debt. Big payments were due in December that it could not pay, a big contributor to the bankruptcy filing. It is now owned by more than a dozen shareholders, with former lenders Oppenheimer, Searchlight Capital and Brigade Capital now the lead investors.

Only a handful of the retailers that filed for bankruptcy in 2017 have successfully re-emerged. Many that filed for bankruptcy, like Gymboree, did so because of debt as a result of private equity buyouts years earlier.

AlixPartners counts 27 non-grocery retail bankruptcies last year, with just six exiting through reorganization. The others were sold or liquidated. Gymboree Group was one of those that reorganized, and AlixPartners was the retailer’s financial advisor.

While re-emerging from bankruptcy in today’s retail environment is not a feat accomplished often, success is not guaranteed. Still, Griesemer, who started as CEO of Gymboree Group just weeks before the company filed for bankruptcy, is hopeful.

“This is a strong company with a healthy balance sheet and I’m so proud of the team that’s running the business in both the home office and the field, and their engagement with the new vision, the long-term vision, their willingness to take risks, their energy and focus. We’re bullish about the future of the Gymboree Group and the brands that we have.”

Griesemer previously was CEO for Tilly’s from 2011 to 2015, and Coldwater Creek from 2007 to 2009.

(Correction: Of the 27 non-grocery retail bankruptcies last year, only six exited through reorganization.)