Tops Markets, LLC has officially announced that it is seeking bankruptcy protection in hopes of eliminating a substantial portion of debt from the company’s balance sheet.
In a release issued Wednesday, the company stated it has “sufficient liquidity to support operations” and that stores will remain open through the process.
Frank Curci, Chief Executive Officer of Tops, attempted to put a positive spin on the restructuring saying he believes the financing they’ve secured form their noteholders is “a vote of confidence” and that they will continue to look toward the future.
Curci went on to say that despite the financial woes of the company, the chain is still well positioned.
“Our operations are strong and we have an outstanding network of stores and a talented team to support them. We are now undertaking a financial restructuring, through which we expect to substantially reduce our debt and achieve long-term financial flexibility. This will enable us to invest further in our stores, create an even more exceptional shopping experience for our customers and compete more effectively in today’s highly competitive and evolving market.”
While news of the bankruptcy leaked days before the official announcement, many local residents are still surprised by the latest development from a company that just a few years ago opened two new stores in Wayne County.
In total, Tops operates 169 full-service supermarkets employing over 14,000 associates across Upstate New York, Northern Pennsylvania, and Vermont.
In Wayne County, Tops operates three stores : Ontario, Walworth and Lyons, with the Walworth and Lyons stores only open a couple of years.
Bob Plant, former Walworth Town Supervisor, who, pushed to gain a grocery store in his town. He feels that things may not be as bleak as they seem.
“I sincerely hope this is just a re-organization, and if enough people use our Walworth TOPS they will keep it open.” Plant acknowledged.
So, what went wrong?
Long before the current group led by Curci took the reigns, the company was saddled with loads of high interest debt. According to a report by The Buffalo News (), SEC filings revealed Tops has to pay more than $80 million a year just in interest, all before paying employees, vendors and expenses.
But Curci and his team had a plan to right the ship. Focus on rural communities and on becoming the small, local grocer that people want and need. That was the driving motivation behind both the Lyons and Walworth stores.
While margins on several grocery items have gone down, increased marketshare is the only real light at the end of the tunnel for midsize operations.
However many of the company’s other local stores are within a close proximity to either a Wegmans or a Walmart, or discount grocers such as Save-A-Lot and Aldis, making competition for the Buffalo based grocer even more difficult. Adding to this already competitive marketplace are players like Amazon who have started to change the way many people are shopping for everyday items.
What’s next?
In court fillings, the company states it has between $1B-$10B in current liabilities. That’s billion with a “b” and yes they can be that vague in initial fillings.
The company said it hopes to cut its annual interest payments to $20 million a year, which would free up more operating capital. How exactly they get such a discount is still up in the air. Creditors will either have to take a small portion of what they’re owed, exchange debt for ownership or some combination of the two.
Five stores in the Tops chain currently operate under a franchise model. Reports show that these stores are clearing close to three times the weekly profits of their counterparts. Why? More staff.
While many retailers point to rising employment costs, the franchise locations have focused on customer service, staffing their stores with more employees to help speed customers through areas such as the deli and bakery departments.
It’s a model that grocers such as Wegmans have known for years, but can and will it be replicated across Tops’ 160+ locations? Time will tell.
What does this mean for customers and employees?
For customers, the company has said shelves will remain stocked and that all of its weekly ads, coupons, and loyalty programs will continue unchanged. However industry experts have noted that if vendors don’t feel confident in being paid, the variety of choices available to consumers could diminish.
As for employees, Tops says it will continue to pay wages and benefits “without interruption” and with no stores slated to shut down as of yet, no jobs are at risk due to the initial restructuring.
The company has set up a special web site with frequently asked questions and more information on the restructuring process at www.topsrestructuring.com.
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