ASHWAUBENON - Shopko has until March 14 to find a way through reorganization or it will have to liquidate its assets, according to bankruptcy court documents filed Wednesday.

Shopko's parent company, Specialty Retail Shops Holding Corp., and 12 of its subsidiaries filed for Chapter 11 bankruptcy protection from creditors, citing excessive debt and a decline in brick-and-mortar retail store sales as customers' shopping patterns changed.

With an eye toward shutting down under-performing stores, the company announced that it will close 105 stores, including the company's original store at 216 S. Military Ave. in Green Bay, according to a website set up to provide information on the reorganization.

"I started crying and said, 'Not my store,'" Green Bay resident Vicki Villers said as she shopped for greeting cards in the Military Avenue store. "My husband (Harvey Villers Jr.) and I depend on this store. We love this store. I hate to see it close."

Other Wisconsin stores on the list are in Neenah, Menasha, Seymour, Manitowoc, West Bend, Stevens Point, Grafton, Plover, Sussex, La Crosse, Mauston and two stores in Madison. Shopko Express stores in Appleton and Buchanan are also on the list.

In court documents, the company reported assets of less than $1 billion and liabilities of between $1 billion and $10 billion. It also laid out a schedule through April 15 that the company must meet in order to emerge from bankruptcy as a going concern that can still operate a smaller company.

Companies and individuals must file claims for unpaid bills by Feb. 15. Government entities have until July 16 to file a claim.

The timeline, filed in U.S. bankruptcy court in Nebraska, calls for Shopko officials to:

Auction off the company's remaining pharmacy assets by Jan. 26 and have the sales approved by Jan. 29.

Secure a reorganization plan sponsor or show the company can finance operations post-bankruptcy by March 14.

Get the bankruptcy judge's approval of the reorganization plan by April 12.

Emerge from bankruptcy by April 15.

Shopko has the support of its creditors for this plan, but the March 14 date looms large. Failure to meet that deadline ends the process and will result in the company's liquidation.

Shopko is owned by Sun Capital Partners, a private-equity firm that bought it for $1.1 billion in 2005.

Analyzing store performance

Shopko is closing stores based on an analysis that identified 70 unprofitable stores and another 40 stores that are only marginally profitable. Closing the stores would free up working capital, streamline operations and better manage inventory. Court filings indicate the company will monitor store performance to see if other locations need to close.

Shopko currently operates 367 stores in 25 states, including full Shopko stores, Hometown stores, Shopko Express and Shopko Optical locations. The company employs more than 14,000 people.

The company will also move 20 optical centers from existing Shopko stores to standalone locations. Shopko opened four such Shopko Optical locations in 2018 and said they have performed well.

Optical centers in stores that aren't closing will remain open. Optical centers in stores that are closing will remain open until the closing. Shopko is working to relocate many of those centers to a free-standing location nearby.

The company has secured up to $50 million in financing from its lenders to continue operating through the reorganization, enabling the company to continue paying employees and vendors in a timely manner.

The company also sought approval for retention payments to employees who are "key to the future success" of Shopko. One payment was made Nov. 9 to a small group of corporate employees. Another 22 employees will be paid a total of $280,000 on April 12 provided they meet terms and conditions of the agreement.

Wells Fargo, one of the banks that has loaned the company money in the past, agreed to provide $480 million in new funding to Shopko once it completes a court-approved reorganization.

'Difficult, but necessary'

“This decision is a difficult, but necessary one,” Shopko CEO Russ Steinhorst said in a news release. “In a challenging retail environment, we have had to make some very tough choices, but we are confident that by operating a smaller and more focused store footprint, we will be able to build a stronger Shopko that will better serve our customers, vendors, employees and other stakeholders through this process.”

Court filings indicate Shopko reported $45.2 million in profit on $2.7 billion in sales in its 2017 fiscal year. The company said its 2018 profits dropped to $35.6 million. The volume of retail sales puts it in line with Bon-Ton Stores Inc.'s reported revenue in fiscal 2017, but well outside the top 100 U.S. retailers as reported by the National Retail Federation and Kantar Consulting.

Shopko currently has four loans with a combined outstanding balance of $439.8 million that are all due by 2020.

The company's 30 largest unsecured creditors are owed a combined $122.8 million. McKesson is the largest unsecured creditor, with $69.8 million owed. Other unsecured creditors include Russell Stover Candies, Payless Shoesource Inc., Tracfone Wireless Inc., Coleman Company Inc., Hasbro Inc. and Adidas.

Not surprised

Industry observers had expected Shopko to file for bankruptcy protection.

"This is one doesn’t surprise me. But it’s a company I hate to see go," said Nick Egalanian, a retail industry expert and founder of SiteWorks Retail Real Estate Services.

The filing comes after a 12-month period that included a $35 million loan from its main landlord, cost-cutting measures, the closure of at least 45 stores, pharmaceutical supplier McKesson Corp.'s lawsuit over $67 million in unpaid bills, and the sale of select pharmacy operations to Kroger, Hy-Vee and CVS in the last 60 days.

RELATED:Shopko store closings: Company adds 6 more Wisconsin locations to store-closings list

In early December, Bloomberg reported Shopko could possibly pursue court protection from creditors after efforts to find a buyer stalled and an out-of-court restructuring looked "unlikely."

On Jan. 7, an attorney for McKesson brought up bankruptcy again in Brown County Circuit Court. Attorney Jeff Garfinkle told Judge William Atkinson he was concerned Shopko would file for bankruptcy protection on Jan. 15, making it more difficult for McKesson to recoup $67 million Shopko owes it for medication shipments.

"Every day, McKesson makes sure that medications patients need are available at the tens of thousands of pharmacies — both big and small — we serve across the country. We spent weeks attempting to work with Shopko’s senior leadership on repayment, while continuing to deliver medicine without receiving payment. Unfortunately, we were unable to reach a sustainable, long-term solution," McKesson said in a statement. "For the communities and patients that rely on Shopko’s pharmacies, we hope that the company can quickly solve its current financial challenges."

RELATED:Pharmaceutical supplier owed $67 million says Shopko to file for bankruptcy Jan. 15

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The company has spent the last several years trying to adapt to a retail market in which customers continue to move away from department stores in favor of specialty retailers and massive big boxes that can offer better prices.

It spent much of 2015 preparing a rapid, aggressive growth plan via its "Hometown" stores that then-CEO Peter McMahon said would solidify the company's position as a quality retailer that served small cities and villages that couldn't attract a Target or Walmart.

The plan included a new slogan, The Stuff that Counts, a new marketing effort and a plan to open 53 stores in 2015, another 100 in 2016 and another 100 in 2017.

By late 2016, McMahon had left the company and the plan to add more stores in 2017 was shelved. Several of the stores that opened during the 2016 expansion are among the 105 stores that will close following liquidation sales happening right now.

A retail industry expert said the moves have proven to be too little too late.

Egalanian, of SiteWorks, said Shopko earned a reputation as a tough, competitive retailer, but was hurt by competition from huge big boxes, rapidly-expanding dollar stores, convenience stores, specialty retailers and internet sales.

"The biggest blow was years and years of competition and little change in their program. It’s not a victim of the internet. It’s a victim of long-term trends," Egalanian said.

From Green Bay to 26 states

Shopko's roots date to March 1961 when Ruben and a group of investors announced plans to build a $1 million department store on Military Avenue to be called Shopco Stores.

RELATED:Shopko timeline

The spelling was amended to ShopKo by the time the company's first store opened on Military Avenue on April 5, 1962. It had 80,000 square feet of retail space and employed 100 people at that time, according to the plaque in the store's entrance.

Green Bay resident Tom Hendricks said he's shopped at the Military Avenue location since it opened. He said he'd end up at Shopko regularly whether he needed something specific or needed his glasses repaired, which is what brought him to the store Wednesday.

"It was very busy back when they opened (in 1962)," he said. "Now, there's so much competition, but when they opened, this was the place to go. Now, not so much."

Shopko's early growth was accelerated when it merged with SuperValu Stores in 1971 and was run by the Minneapolis grocery store chain for 20 years.

The company built a new corporate headquarters on Ashland Avenue, in Ashwaubenon, in the 1970s. In 1987, a new headquarters building opened in a new Ashwaubenon location just east of Bay Park Square. The company still occupies that building, which is for sale for $24.3 million.

In 1991, SuperValu spun Shopko off as a publicly traded company, with initial shares offered at $15 per share. The spinoff wasn't complete until 1997, when Shopko had bought the last 46 percent of its stock from SuperValue.

The company again changed hands in 2005, when it was bought by its current owner, Sun Capital Partners.

Egalanian said the company never gained the national notoriety of some big boxes, but it did have a good reputation in the industry.

"Shopko goes back to the days when there were regional discounters. Shopko persisted. It was extremely well run. It was well-positioned in the northern tier. They were known for their service and being a well-run operation," Egalanian said.

The company also built a reputation as a major supporter of nonprofits in the Green Bay area and markets it served. The Shopko Foundation donated $250,000 to HSHS St. Vincent Childrens Hospital in June 2018 and regularly supported the Epilepsy Foundation, Boys and Girls Clubs, educators, and Shop with a Cop programs in multiple Wisconsin communities.

Shopko spokeswoman Michelle Hansen said the foundation awarded more than $350,000 to Green Bay and Fox Valley area nonprofits and $1.1 million to nonprofits in 2018 and has awarded $34.6 million over its 39-year history.