Denver's most advertised jeweler, Shane Co., has filed for bankruptcy under Chapter 11. The survival rate of retailers in bankruptcy under the new bankruptcy law adopted in 2005 is horribly low, mostly because the new bankruptcy law makes it hard for retailers to benefit from the economic value of their long term leases.
Shane Co. focuses on securing a high volume per store, rather than having many convenient locations, and generally locates out of the malls and big box locations that are home to most retailers in bankruptcy (for all I know the locations may be either owned by the store or by a related party insider), so the situation isn't hopeless for the company, although it is bleak. Numerous jokes based upon the chain's prolific radio advertising are circulating, but I have chosen not to recycle any of them, as almost all are cringeworthy.
The Denver Business Journal offers more background on the nature and scope of the business, but little insight into the financial fundamentals driving the move.
The largest bankruptcy creditor of the firm appears to be a trade creditor, and some of the first day motions in the case appear to relate to credit card payments, so the immediate cause of the bankruptcy may be a collapse of short term credit similar to that experienced by Frontier Airlines before its bankruptcy. On the retail side it is fair to speculate that Shane Co., which does not sell significant volumes of semi-precious gemstones and offers few discounts on its merchandise, may have had trouble gaining enough at the low end of the jewelry market to make up for falling sales at the high end of the market.
Customer deposits and lay aways receive significant protection in bankruptcy as priority creditors under Section 507 of the U.S. Bankruptcy Code (United States Code Title 11), subject to a dollar cap of $2,225 (after the most recent triannual inflation adjustment under Section 104 of the Bankruptcy Code made in 2007), that trumps even amounts due for back taxes. So, only customers with the largest deposits are likely to lose their deposits in the end, even if Shane Co. fails to reorganize and general creditors received nothing, although access to those deposits and layaways could conceivably be delayed. If Shane Co. does reorganize (i.e. stay in business after its debts are adjusted in bankruptcy), deposits and layaways are almost certain to be honored in full.
The case is Shane Co., 09-10367, U.S. Bankruptcy Court, District of Colorado (Denver), and original documents can be accessed using the federal court's PACER system.
Full Disclosure: I've purchased jewelry there and a family member once worked for the company on a temporary two day project that produced a small hourly wage and a t-shirt.