Burnsville-based Pawn America Minnesota filed for Chapter 11 bankruptcy protection this week, succumbing to surging competition from online competitors and other factors shaking up the retail sector.
The company - which operates 23 pawnshops in Minnesota, Wisconsin and the Dakotas, including one in Duluth - reported on Wednesday that it owes between $10 million and $50 million to fewer than 1,000 creditors.
Pawn America President and founder Brad Rixmann, in a message to employees, said he plans to reorganize and emerge from bankruptcy stronger.
"I remain as excited today about the future as I did 25 years ago when we opened our first store," he said. "This is not a shutdown. This is not a liquidation. It's just a reorganization. Pawn America stores remain open for business, serving customers and will continue to operate in the ordinary course of business."
The retail chain does not yet have a restructuring plan in place, so it has no details on what stores might close or if staff will be cut, the company said.
The company and its affiliated businesses, which started with a single store in Robbinsdale in 1991, now have about 450 employees who buy and sell used jewelry, electronics, computers, household items, sporting goods and other merchandise.
The company closed its St. Paul store on Suburban Avenue two months ago and has cut its staff by 50 workers through a mix of attrition and downsizing, officials said.
The downsizing is in strict contrast to Pawn America's rocket-like growth during its first 25 years in business. Employment rose from about 100 employees in 2008 to 350 three years later.
It eventually hit the 500-employee mark.
The bankruptcy filing is driven by the challenges seen across the entire brick-and-mortar retail industry, said Pawn America spokesman Mike Erlandson.
Bankruptcy "is not a course any business wants to pursue," he said. "But if you just look at the retail sector in general, the closing of Macy's, Sears and J.C. Penney stores and the heightened competition of Wal-Mart and Target, [Pawn America's experience] is not unlike what you are seeing across all of retail."
Buying trends are shifting and there are differences between the shopping habits of baby boomers vs. millennials, Erlandson said. Pawn America's online business is doing very well, while some of its traditional stores are not.
Rixmann spent much of Wednesday and Thursday reaching out to store managers, staff and vendors and said he has been encouraged by their support.
"This is an unfortunate circumstance," Rixmann said. "We are committed to confronting this challenge and to building a stronger Pawn America for our customers, employees and other stakeholders. While we will have to make tough decisions going forward, Pawn America will emerge stronger and better able to compete in the marketplace."
During its restructuring Pawn America has hired Stinson Leonard Street to be its legal adviser. Alliance Management will act as restructuring adviser.