Shopko Stores Operating Co. LLC filed for Chapter 11 bankruptcy protection from creditors in Nebraska on Wednesday.
The company reported assets of less than $1 billion and liabilities between $1 billion and $10 billion.
The company said it will close another 38 stores as part of the reorganization and has secured up to $480 million in financing from a group of lenders led by Wells Fargo Bank.
"This is one doesn’t surprise me. But it’s a company I hate to see go," said Nick Egalanian, a retail industry expert and founder of SiteWorks Retail Real Estate Services.
The filing comes after a 12-month period that included a $35 million loan from its main landlord, cost-cutting measures, the closure of at least 45 stores, pharmaceutical supplier McKesson Corp.'s lawsuit over $67 million in unpaid bills, and the sale of select pharmacy operations to Kroger, Hy-Vee and CVS in the last 60 days.
In early December, Bloomberg reported Shopko could possibly pursue court protection from creditors after efforts to find a buyer stalled and an out-of-court restructuring looked "unlikely."
On Jan. 7, an attorney for McKesson brought up bankruptcy again in Brown County Circuit Court. Attorney Jeff Garfinkle told Judge William Atkinson he was concerned Shopko would file for bankruptcy protection on Jan. 15, making it more difficult for McKesson to recoup $67 million Shopko owes it for medication shipments.
"Every day, McKesson makes sure that medications patients need are available at the tens of thousands of pharmacies — both big and small — we serve across the country. We spent weeks attempting to work with Shopko’s senior leadership on repayment, while continuing to deliver medicine without receiving payment. Unfortunately, we were unable to reach a sustainable, long-term solution," McKesson said in a statement. "For the communities and patients that rely on Shopko’s pharmacies, we hope that the company can quickly solve its current financial challenges."
The Ashwaubenon, Wisconsin-based retailer started as a privately held company pharmacist James Ruben and a group of investors launched in 1962. Shopko's first store is still in operation today. It merged with SuperValu Stores in 1971 and was run by the Minneapolis grocery store chain for 20 years.
In 1991, SuperValu spun it off as a publicly traded company, with initial shares offered at $15 per share. The spinoff wasn't complete, though, until Shopko bought the last 46 percent of stock from SuperValu in 1997.
The company was bought by private equity firm Sun Capital Partners in January 2005 for $1.1 billion.
The company has spent the last several years trying to rebrand and reshape itself to adapt to a retail market where customers continue to move away from department stores like Sears and Younkers and toward specialty retailers and massive big boxes that can offer better prices.
Shopko's first rebranding came in 2007 when it ditched the longtime red and blue logo for a sleek, tan and black color scheme.
It spent much of 2015 preparing for a rapid, aggressive growth plan then-CEO Peter McMahon said would solidify the company's position as a quality retailer that served small cities and villages that couldn't attract a Target or Walmart via its "Hometown" stores.
The plan included a new slogan, The Stuff that Counts, a new marketing effort and a plan to open 53 stores in 2015, another 100 in 2016 and another 100 in 2017.
In October 2015, the company sold its distribution operations to a subsidiary of Ontario-based Metro Supply Chain Group, in an effort to focus on its core retail business.
By late 2016, McMahon had left the company and the plans to add more stores in 2017 was shelved. Several of the stores opened during the 2016 expansion are among the 39 stores Shopko announced will close following liquidation sales happening right now.
A retail industry expert said the moves have proven to be too little too late.
Egalanian, the SiteWorks founder, has more than 30 years of experience in the retail industry. He said Shopko earned a reputation as a tough, competitive retailer, but it had been hurt by competition from huge big boxes, rapidly-expanding dollar stores, convenience stores, specialty retailers and internet sales.
"The biggest blow was years and years of competition and little change in their program. It’s not a victim of the internet. It’s a victim of long-term trends," Egalanian said. "
This article originally appeared on Green Bay Press-Gazette: Shopko files for Chapter 11 bankruptcy protection, will close 38 more stores across country