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Craig Warga/Bloomberg News
Brookstone Inc., the specialty retailer known for selling massage chairs, travel gadgets and other novelties at malls and airports, filed for bankruptcy protection Thursday and said it would close its 102 mall-based stores.
The shops were popular places to hang out when Americans spent more of their idle hours at malls, relaxing in Brookstone’s massage chairs and browsing its eclectic offerings. But as more shopping moved to smartphones and mall trips became more targeted, the stores became less of a draw.
Ivan Zhang, a 20-year-old student in Baltimore, said he frequented the store throughout his childhood, usually to take a break after walking around the mall. “You would go to the nearest Brookstone and take a breather on the massage chair,” he said. “I always wondered how do they make money? I never saw anyone buying anything.”
Several shoppers at a Brookstone in New York City on Thursday morning were surprised to hear the chain had filed for chapter 11 bankruptcy protection. Some were testing out a neck massager. Others were just looking to kill time. None was making a purchase.
“My wife’s getting coffee so I thought I’d walk over to Brookstone and see if there is anything cool,” said Lee Schneider, 49, of Neenah, Wis., who left without buying. “That’s usually what I do at a Brookstone.”
The chain got its start as a catalog retailer in 1965 selling “hard-to-find tools” and was taken private in 2005. Weighed down by debt and weak sales, the company filed for bankruptcy in 2014 and was sold to a consortium of Chinese investors.
The catalog remained until earlier this year, when Brookstone decided to cease sending the booklets as it faced a cash crunch.
The business outlasted several of its rivals, including Sharper Image, which filed for bankruptcy and closed its stores in 2008, and in-flight catalog SkyMall, which filed for bankruptcy in 2015. Both brands live on as websites under new owners.
Brookstone said Thursday it would put its 35 airport stores up for sale. Those locations are still performing well, the company said. The Wall Street Journal reported last month that Brookstone was in talks with liquidators to close its mall outlets.
The airport stores, which sell products as diverse as travel pillows and Brookstone-branded virtual-reality goggles, have fared better than the mall shops, people familiar with the matter say. Airport locations make up 17% of Brookstone’s net sales. In 2017, the airport stores had nearly $38 million in sales, down from $44 million in the previous year.
While Brookstone sells Fitbit watches and Tempur-Pedic pillows, most of the company’s products are Brookstone-branded, and account for nearly 70% of its net sales. The company will also look to sell its intellectual property, including its brand name, and e-commerce operations, through a bankruptcy-run auction.
Brookstone hopes to close a sale before the end of September, court papers show.
Retailers that have sought bankruptcy protection and closed their stores have lived on through their brand names. American Apparel Inc., The Sports Authority Holdings Inc., and Limited Stores Co. sold their brands at competitive auctions. Toys “R” Us Inc. plans to sell its brand and other intellectual property.
In its 2014 bankruptcy filing, Brookstone had snagged an initial offer from the owner of mall specialty retailer Spencer’s. The bid was later upended by a Chinese group that included investment firm Sailing Capital Overseas Investment Fund LP and conglomerate Sanpower Group.
Brookstone has lined up a $30 million bankruptcy loan to keep the doors open at its airport stores during the bankruptcy case.
After its 2014 trip through bankruptcy, Brookstone’s new Chinese owners pledged to keep most of its 240 stores open. However, it has closed dozens of stores since then. Currently Brookstone operates 137 retail stores, court papers show.
Like many of their peers, Brookstone stores have suffered as mall foot traffic declines and consumers shift to online shopping. There were about 9,000 store closures in 2017, and that number is expected to rise this year, according to a recent report from consulting firm BDO USA LLP.
The retail industry is undergoing another major shift — to e-commerce. How did we get here? Photo: Associated Press
Brookstone’s mall stores have operated at a loss yearly since 2014, court papers show. Net sales for these stores stood at roughly $138 million in 2017, down from $188 million in 2016.
Mall vacancies reached a six-year high recently. The average mall vacancy rate in 77 metropolitan areas reached 8.6% in the second quarter, up from 8.4% in the first quarter, according to research firm Reis Inc.
Write to Lillian Rizzo at Lillian.Rizzo@wsj.com