10 of Wall Street's Biggest Disappointments of the 2010s

Ellen Chang

The decade wasn't kind to these companies.

The past decade marked the end of many companies, even ones that were beloved by consumers for many years. Several factors led to their demise, including the acquisition of some companies by private equity firms who took on too much debt, failure to adopt technology and not keeping up with their competitors. Shifting consumer sentiment and failure to embrace digital technology wounded many of these companies, says Joshua Posamentier, co-founder and managing partner at Congruent Ventures, a San Francisco-based venture firm. Here are 10 major companies that had huge downturns in the 2010s.

Eastman Kodak Co. (ticker: KODK)

Kodak's reliance on selling film was a gamble it lost. By the 1980s, Kodak sold, spun off or shut down businesses that were less profitable. Several of them, including the commodity chemicals maker Eastman Chemical Co. (EMN), are still healthy growing businesses today. "Eastman Kodak is a corporate America poster child for a company that effectively owned an analog industry, photographic film, only to become marginalized by the digital transition," says Mark Hamrick, a senior economic analyst at Bankrate. The company emerged from Chapter 11 bankruptcy protection in 2013, but today operates a smaller imaging business.

Toys R Us

While Toys R Us was beloved by children and everyone who spent their childhoods eyeing the store's latest toys and games, many factors contributed to its downfall. In 2005, real estate firm Vornado Realty Trust and private equity firms Bain Capital and Kohlberg Kravis Roberts bought Toys R Us and saddled it with $5.3 billion in debt. Toys R Us filed for Chapter 11 in 2017 and the 70-year-old company closed in 2018. The company was no longer relevant and had emerged as a "big, dirty box full of interchangeable products," says Frank Beard, an analyst of retail trends at GasBuddy, who discusses the retailer in customer experience presentations. "Toys R Us failed to keep pace, effectively becoming a dollar store environment with boutique prices," he says.

Blockbuster

Blockbuster offered many videotapes and DVDs of movies, but failed to take one thing into account: Humans are often lazy and given the choice of dropping off a movie or watching DVDs that are mailed to them, they will often choose the latter. The company's competitors such as Netflix (NFLX), Redbox and TiVo (TIVO) wound up with a large chunk of the market share and by 2010, Blockbuster faced $900 million in debt and was forced to file for Chapter 11 bankruptcy protection. "It chose to not compete against itself using a similar model until it was too late" and Netflix had taken some of its customers, says Carlos Castelán, managing director of the Navio Group, a retail consulting firm.

Gymboree

Gymboree filed for bankruptcy twice in less than two years. The children's clothing retailer filed for bankruptcy in June 2017 after it was acquired in 2010 by Bain Capital for $1.8 billion. The private equity firm stuck the retailer with a massive amount of debt while growing too quickly by opening 1,300 stores globally. Gymboree managed to shed $900 million of its debt in bankruptcy, but that was not sufficient. The retailer closed stores that were not generating a profit and attempted to sell the company in 2018. When the company failed to find a buyer, it was forced to file Chapter 11 again in January 2019. "Private equity certainly killed Gymboree by overloading it with debt it couldn't grow into," Posamentier says. "It's a largely inelastic business."

Payless ShoeSource

Payless, the discount shoe retailer, had to file for Chapter 11 protection in 2017 and wound up closing all of its 4,400 stores in over 30 countries during the next two years. Even though Payless sold shoes online and had shed $435 million in debt during its restructuring process, the retailer could not compete with a growing number of online retailers and discount retailers such as TJ Maxx, part of the TJX Companies (TJX). The lesson for investors is that even the "mightiest of companies can eventually be humbled by innovation, change and globalization," Hamrick says. "But other mighty companies ascend, as we've witnessed with the likes of Apple (AAPL), Netflix and Google (GOOG, GOOGL)."

Sears Holdings Corp.

Once the quintessential American department store, Sears succumbed under the weight of online retailers and specialty large box retailers. The company's stock trades often for less than a quarter. The Sears catalog was once highly anticipated by shoppers since you could buy almost everything, even the material and blueprints for their houses. The rise of discount retail starting in the 1960s began the "slow-motion decline we continue to witness unfolding," Castelán says. Even though Sears, Roebuck and Co. was later acquired Kmart for $11 billion in 2004, the company failed to thrive and filed for bankruptcy in 2018.

Claire's

Founded in 1961, Claire's sells inexpensive accessories and jewelry geared for young women. Many of its stores were located in shopping malls. In 2017, the jewelry retailer had $2.1 billion in debt after it was acquired by private equity firm Apollo Management for $3.1 billion in 2007. Fewer people shopping at brick-and-mortar stores along with the emergence of other retailers geared for younger shoppers such as Forever 21 and H&M led to lower sales. The retailer emerged from its bankruptcy in 2018 after wiping off $1.9 billion of debt. The company also received $575 million in capital and pared down the number of locations from drastically from 7,500 locations in 45 countries to 2,471 stores in 17 countries in North America and Europe.

Radio Shack

A store where consumers bought batteries, radio-controlled cars and other household electronic items, Radio Shack wound up filing for Chapter 11 twice within two years. In 2017, the retailer filed for bankruptcy again. Radio Shack, which opened its first store opened in Boston in 1921, has attempted to turn its business around. Located at shopping centers, the store later sold toys, mobile phones and satellite TV. The company was acquired by General Wireless, a joint venture of Sprint Corp. (S) and Standard General, a hedge fund, in 2015 after its first bankruptcy. Innovation in technology and rise of e-commerce led to the death of companies like RadioShack. "In some way, technology killed many companies such as Radio Shack, Circuit City and Payless," Posamentier says.

David's Bridal

A retailer selling wedding gowns, bridesmaid and prom dresses and tuxedos, David's Bridal filed for Chapter 11 in 2018 after facing too much debt while consumers opted for different and nontraditional styles in wedding attire. In less than two months, David's Bridal emerged from bankruptcy and eliminated $450 million in debt. The company is now owned by lenders such as Oaktree Capital Group. The company was acquired by Clayton, Dubilier & Rice, a private equity firm, in 2012 for $1.05 billion. The first store opened in 1950 in Fort Lauderdale, Florida. Now David's Bridal has over 330 stores in North America and the United Kingdom.

Borders

Once a staple of book, music and movie lovers, Borders was a main rival to Barnes and Noble (BKS). But the company failed to adjust as customers shifted to tablets and e-readers, causing sales to shrink and debts to mount. Borders filed for bankruptcy in 2011 with liabilities of $1.29 billion.

Companies among the biggest disappointments of the 2010s:

-- Eastman Kodak Co. (KODK)

-- Toys R Us

-- Blockbuster

-- Gymboree

-- Payless ShoeSource

-- Sears Holdings Corp.

-- Claire's

-- Radio Shack

-- David's Bridal

-- Borders