Dive Brief:
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Off-price retailer Forman Mills is laying off 245 employees in Pennsylvania by Aug. 4, according to a WARN filing with the state’s Department of Labor & Industry. The layoffs affect workers at seven stores that could close, including one in Philadelphia that has already closed.
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The company is working to sell itself, and may file for Chapter 11 if it can't, according to a WARN letter sent to the state. Neither Forman Mills nor private equity owner Goode Partners immediately responded to requests for comment.
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In New Jersey, a Forman Mills employee on June 7 sued the retailer for laying off more than 50 employees who had worked at its Pennsauken, New Jersey, location. The employee alleges that Forman Mills failed to give proper notice and severance, contrary to state law.
Dive Insight:
Several big off-price and discount chains are benefiting from consumer frugality in the face of inflation and economic uncertainty. But those catering to lower-income groups are bearing the brunt as those households tamp down their discretionary spending more drastically than others.
This is seen at stores like Dollar General, according to research from GlobalData.
“As finances come under increasing pressure, core shoppers are trying to limit what they spend, and this means trips are more planned and largely focused around buying consumables,” GlobalData Managing Director Neil Saunders said in emailed comments earlier this month. “Some of the impulse-driven trips and occasional top-up trips have been dropped as lower-income consumers look to remove temptation and curtail non-essential buying.”
Forman Mills, which was founded in Philadelphia in 1985, may also be contending with the realities of private equity ownership: More than 40% of retailers acquired by private equity firms since the 2000s have gone bankrupt, according to Retail Dive analysis. Private equity firm Goode Partners, with some investment from Cohesive Capital Partners, bought the regional off-pricer in 2016. Monroe Capital provided a $32.5 million senior credit facility to support the deal.
At the time of the acquisition, Forman Mills ran 36 stores in nine states.
