Carrollton-based Gadzooks, the teen fashion retailer that has been wandering aimlessly in chapter 11 since February of last year, announced yesterday that it would sell its assets to the highest bidder and give up on its dream of reorganizing and emerging from chapter 11.
As in the recent case of sandwich franchisor, Schlotzky’s, Gadzooks’ liquidation will generate a pittance in comparison to the company’s debt, which means that unsecured creditors will likely receive no dividend on their claims against the company.
The business risk of highly-leveraged and specialized companies such as Gadzooks is perhaps best articulated by the reaction of one of my two teenage daughters, both of whom are both experts in the area of purchasing from teen fashion retailers. Although dismayed last year when Gadzooks went into the tank, when I mentioned the latest news about Gadzooks’ final demise, one of my girls turned to me and observed with no remorse:

“Oh, yeah. I remember that store. They were toast a long time ago.”