Christmas Tree Shops has joined its former owner Bed Bath & Beyond in seeking bankruptcy protection, adding to the growing list of retailers this year that have filed for Chapter 11.  

The Middleborough, Massachusetts-based chain went to U.S. Bankruptcy Court in Delaware to seek voluntary protection Friday. The retailer plans to restructure and continue operations but is looking to close about 10 underperforming stores. The chain, which recently rebranded as CTS, said it has received a commitment for up to $45 million in debtor-in-possession financing from Eclipse Business Capital and ReStore Capital.

A handful of troubled retailers have now filed for Chapter 11 this year, with some citing the repercussions of the pandemic and less spending by consumers for their woes. Christmas Tree Shops' former owner, Union, New Jersey-based Bed Bath & Beyond, has started shuttering all its namesake and Buy Buy Baby stores and will be forced to liquidate all its operations if it doesn't find a buyer.

David's Bridal, based in Conshohocken, Pennsylvania, has also sought bankruptcy protection, and Dallas-based Tuesday Morning, is liquidating after filing. Corner Bakery, based in Dallas, has filed for Chapter 11, as has Party City, based in Woodcliff Lake, New Jersey.

In a statement, Christmas Tree Shops said its financial restructuring "will reduce the company’s debt, better aligning its balance sheet with current market conditions that have been negatively impacted by slowing consumer demand fueled by inflationary pressures and increased interest rates."

The company said it expects to complete its reorganization and emerge from Chapter 11 before the end of August.

Christmas Tree Shops now has 82 stores in 20 states, brick-and-mortar locations that specialize in year-round seasonal goods at value pricing, including home decor, bed-and-bath products, kitchen and dining products, furniture, and food.

“After careful consideration we determined that availing ourselves of the Chapter 11 process was the best way to address our burdensome liabilities,” Marc Salkovitz, the retailer's chairman, said in the statement. “This is strictly a financial restructuring. Our operations are sound. ... We continue to believe that given its storied history and strong customer loyalty, [Chistmas Tree Stores] has tremendous potential, and we remain committed to the long-term success of the business.”

Christmas Tree Shops was founded in 1950 as a seasonal gift shop near Cape Cod, Massachusetts, Salkovitz said in a court filing. In 1970, the store was purchased by Charles and Doreen Belzekian, and the couple began to specialize in closeouts, off-price goods and other bargains, according to Salkovitz. In 1977, Christmas Tree Shops debuted a big-box location in Hyannis, Massachusetts, and began importing goods from Asia.

The chain further expanded in the 1980s, opening stores in Pembroke, Massachusetts; Sagamore, Massachusetts; and Newport, Rhode Island, according to Salkovitz. By 2003, Christmas Tree Shops had grown to 23 stores and was acquired by Bed, Bath & Beyond for roughly $200 million. In 2020, Salkovitz's Handil Holdings purchased the chain for about $250 million from the home-goods icon.

In the statement, Handil said Christmas Tree Shops had "made a series of operational improvements to the business, including bringing in experts to improve operational efficiencies and inventory management." The retailer also developed a new store prototype and introduced a customer loyalty program.

Christmas Tree Shops has roughly 83 leases, with 11 of them subleases with Bed Bath & Beyond, Salkovitz said in the court filing. As part of its Chapter 11 proceedings, Bed Bath & Beyond "filed a motion to reject certain of its leases, including the leases for properties which are subleased to" Christmas Tree Shops, he said.

Regarding the subleases from Bed Bath & Beyond, Salkovitz told The Wall Street Journal that now Christmas Tree Shops will have to negotiate those lease deals directly with landlords for the first time.

The chain's sales have been in a downward spiral. In the 10-month period from February 2021 through December 2021, Christmas Tree Shop's revenue was roughly $597 million, generating a net income of almost $6 million, Salkovitz said in the court filing.

"Beginning in 2022, certain outside factors negatively affected [Christmas Tree Shops]," he said. "Rising interest rates, oil prices, and the continuing effects of the COVID-19 pandemic reduced store traffic and sales in the spring of 2022," he said.

Since May 2022, customer traffic at the chain dropped by about 35%, and in that year its revenue was $544 million, according to Salkovitz. In January this year, Christmas Tree Shops downsized corporate staff overhead and eliminated overnight inventory staffing in all its stores, resulting in over $2 million in annual savings, Salkovitz aid. But sales continue to be significantly lower than 2021 levels, in part because of the constraints on the company's ability to maintain inventory, he said.

In February, the chain sold its distribution facility in Middleborough for $105 million to Lincoln Property Co. of Dallas, according to CoStar data. Christmas Tree Shops is leasing back the property.

The Chapter 11 filing will give the company a chance to get back on its feet, according to the chain.

"We are confident we will emerge a stronger business, better positioned to grow and prosper into the future,” Salkovitz said in the statement.

The law firms of Murphy & King and Troutman Pepper Hamilton Sanders are representing Christmas Tree Shops, with Hilco Merchant Resources retained to dispose of inventory.