UPDATE: December 4, 2018: A Shopko representative confirmed in an email to Retail Dive that the company is closing 39 stores. "Those stores will begin liquidation on December 7 and will close at the end of February," a spokesperson said. The news comes on the heels of a Debtwire report that stated that the retailer is exploring restructuring. It was unclear at press time if the store closures are directly related.

Dive Brief:

Shopko, owned by private equity firm Sun Capital, is working with Kirkland & Ellis as legal counsel and BRG for restructuring assistance, Debtwire reports, citing unnamed sources. Sun Capital declined to comment to Retail Dive, and Shopko did not immediately return Retail Dive's request for comment.

The Wisconsin-based, rural retailer, which runs a website plus 363 stores in 24 states throughout the Central, Western and Pacific Northwest regions, has also hired Houlihan Lokey to explore strategic alternatives, according to the report by Debtwire's Reshmi Basu, which was emailed to Retail Dive.

Shopko earlier this year sold some pharmacy customer lists for almost $6 million, sources told Debtwire, as part of an effort to mitigate costs. Privately owned since 2005, the company reported revenue of $652 million for the quarter ended Aug. 4, down from $679 million in the year-ago quarter, sources told Debtwire. The company is also saddled with debt, and Spirit Realty Capital, which now owns much of its real estate, in January provided a $35 million term loan B-1 facility due 2020 with a 12% interest rate sharing collateral with its $784 million asset-backed lending facility, Debtwire said.

Dive Insight:

While Debtwire attributes Shopko's decline in part to the rise of e-commerce and cost-cutting efforts, e-commerce has little to do with it, according to retail analysts Nick Egelanian, president of retail development consultants SiteWorks, and Brian Kelly, president of consultancy Brian Brands.

"Shopko used to be a great regional company," Egelanian told Retail Dive in an email. "I doubt the internet had much to do with it. Tough to be a small guy in the world of 4,500 Walmart's and 15,000 Dollar General stores."

Kelly concurred, adding that its private equity ownership has pressured it — a force which has caused trouble for plenty of other retailers. Kelly also pointed to its place in rural America, in areas too small to support a Walmart store, as being problematic. "Being on a short leash by [Sun Capital], there is little investment in stores. They are a wreck," Kelly told Retail Dive in an email. "Generations of sign packages results in a cacophony of brand look and message. The assortment is bizarre, adding categories that should work, but at uncompetitive prices. It's the brand being consumed by dollar and convenience stores on one end and Farm and Fleet and Tractor Supply on the other."

Tractor Supply is a similar but larger retailer in expansion mode that, with Costco, has been snagging top customer experience accolades that beat even Amazon.

"Shopko is the department store of rural America. And like urban/suburban department stores it's woefully irrelevant," Kelly said. "Add that to the economic collapse of rural America. Another retailer broken by debt and a PE firm, caught in the death spiral of blindly trying to goose sales and [ending] up flogging the brand."