Odds are long for retailers that file Chapter 11

The virulent disease that has struck retailers in the last few years isn't fussy about the victims it claims. Marbles: the Brain Store, a seller of "smart toys," is liquidating. An electronics retailer that competes with Best Buy Co. called HHGregg is trying to avoid a complete liquidation.

The clothing retailers are suffering, too, with only about half the stores of apparel retailer Gordmans slated to survive bankruptcy, but not five of the six in Minnesota. Payless ShoeSource filed for bankruptcy protection as well, with four Minnesota stores on the initial closing list.

The recreational equipment segment hasn't been passed by, either. Sports Authority has been liquidated, Eastern Outfitters filed for bankruptcy in February and St. Paul-based Gander Mountain Co. did in March.

More bankruptcies are coming. By the estimate of a Credit Suisse analyst, nearly 9,000 stores will close this year, many more than in the worst year of the Great Recession. In February, Moody's Investors Service said that the number of U.S. retailers with debt rated ­solidly in the junk category had tripled in the previous six years, with $5 billion scheduled to be repaid by these companies through 2021. Some of those scheduled payments aren't going to be made.

If history is any guide, there's no reason to expect any of these bankrupt ­retailers will ever emerge and enjoy a long run of success as independent ­companies. Try to remember the last time a big retailer did that.

I didn't come up with any, either.

A bankruptcy filing isn't supposed to be a corporate suicide, just court-protected breathing room to reorganize finances and operations to remain in business. For manufacturers, real estate partnerships and other businesses, a trip through the bankruptcy court, while painful, can lead to years of profitable existence. For retailers, that never seems to work.

There's a new, sardonic term being applied to retailers' finances, a "Chapter 22" bankruptcy. That's a second Chapter 11 bankruptcy just after the first. RadioShack's parent company is going through that, and American Apparel came out of bankruptcy and lasted only about nine months before filing again.

The long odds have to do with the nature of retailing industry, said Marc Levinson, an economic historian whose books have included a history of the once giant grocery retailer A&P.

"Most successful retailers have a public image that they've cultivated, what people associate with their brand," he said. "As the retailer gets into financial trouble, it typically has to pull back on many of the things that helped develop that reputation. You can't sustain the image of the store."

Trimming costs at a manufacturer may not even be visible to the customer base, but it's easily spotted by the retail customer. Anyone can see when fewer checkout counters are staffed. Dirty restrooms, scratched shelves, ripped carpet that doesn't get replaced; it all undermines the store's appeal. Even worse is not having merchandise that customers expect, perhaps as a manufacturer stops shipping due to concerns about getting paid.

Of course retailing relies very heavily on having good real estate, too, Levinson said. Financially distressed retailers may have too many stores, have them in the wrong locations as traffic patterns shift or have built them too big. Healthy retailers tweak their store portfolio all the time, moving a store from a shopping center that may have gone into decline. A financially stretched retailer can't afford to do that.

Getting rid of unprofitable stores solves some problems but presents another set, Levinson said, because a retailer finds it hard to quickly reduce the size of the costly infrastructure that supported a larger store base. One example is ending up with a distribution center maybe half again too large.

Asked to think of a retailer that has thrived after bankruptcy, he responded "give me a minute to think …" before finally naming Macy's, which merged into Federated after going bankrupt in 1992. Macy's is still going 25 years later, but of course the news lately is of Macy's closing lots of stores, including its flagship store in downtown ­Minneapolis.

Gander Mountain carried more than $400 million of secured debt into its March bankruptcy filing, but like a lot of other retailers it had an operating profit problem, not just a too-much-debt ­problem. The company had sales of $1.3 billion in its last fiscal year, out of 160 stores and an e-commerce operation. A lot of those stores were opened in the last five years, an expansion strategy that flopped.

The company has "accumulated substantial operating losses over the past two fiscal years, primarily as a result of changing market trends, including shifting sales from traditional brick-and-mortar retailers to a host of online resellers," wrote restructuring adviser Tim Becker of Lighthouse Management Group in a bankruptcy court filing.

Gander Mountain has found itself competing with its own suppliers, which are increasingly going around Gander Mountain directly to customers. And of course with all the competition, there's been a lot of price-cutting in the industry.

Gander Mountain, owned jointly by the Pratt family of greater St. Louis and Bloomington-based Holiday Cos., brought financial restructuring advisers on board in January. It had previously tried to find a buyer for its e-commerce business, based in North Carolina, but didn't get a satisfactory bid.

A company spokesman declined to comment, but the strategy in bankruptcy seems clear. About a fifth of its stores are to close right away. It's hoping to find a single buyer for the bulk of its remaining stores. A good candidate could be Utah-based Sportsman's Warehouse, hopefully seeing value in taking over Gander Mountain stores to expand its strong position as an outdoor retailer in the West.

It's too soon to speculate on the outcome, but there's every likelihood that Gander Mountain, as an independent company, will go away. Of course, that was clear the day in February that Reuters first reported that Gander Mountain was heading for bankruptcy.

lee.schafer@startribune.com 612-673-4302