Is private equity fueling the next wave of retail bankruptcies? Lessons from At Home, Joann, and Bed Bath & Beyond

At Home’s Chapter 11 filing puts spotlight on private equity–backed retail failures in 2025

At Home Group Inc.’s recent Chapter 11 filing is the latest flashpoint in a growing trend of private equity–backed U.S. retailers collapsing under heavy debt loads. On June 16, 2025, the Texas-based home goods retailer filed for bankruptcy protection in the U.S. District of Delaware, seeking to shed nearly USD 2 billion in debt. At Home, which was acquired by Hellman & Friedman in 2021 for USD 2.8 billion, plans to close 26 stores—including eight in California—as part of a court-supervised restructuring agreement backed by lenders representing over 95 percent of its debt.

At Home is not alone. Joann Fabrics filed for bankruptcy in March 2025 for the second time in less than a year. Bed Bath & Beyond shut down operations in 2023 after an unsuccessful turnaround attempt under significant investor pressure. These failures have come to represent a structural fault line in U.S. retail: private equity–owned businesses are over-indexed in Chapter 11 filings. Although such firms account for just 6.5 percent of the economy, they made up 70 percent of large bankruptcies in Q1 2025.

How are private equity acquisitions accelerating insolvency risks across U.S. retail chains in 2025?

Private equity firms typically finance acquisitions through leveraged buyouts—placing large volumes of debt directly onto the acquired retailer’s balance sheet. This strategy, while designed to extract value through financial engineering, leaves the target highly vulnerable to macroeconomic shifts such as rising interest rates, slowing demand, or inflationary shocks.

At Home’s debt surged post-acquisition, with mounting interest costs and elevated tariffs on Chinese imports eroding cash flow. Its filing detailed a capital structure strained by external shocks and lease obligations across its 260-store network. The USD 200 million debtor-in-possession financing now supporting At Home’s operations is a temporary lifeline to preserve its 234 remaining stores while 26 shutter. Creditors are expected to take full control of the reorganized business by Q4 2025.

Joann Fabrics, previously owned by Leonard Green & Partners, filed for Chapter 11 in March 2025 with more than USD 500 million in outstanding debt. By May, it had begun liquidating its store base after failing to restructure profitably. Its intellectual property was subsequently sold to Michaels. Bed Bath & Beyond’s Chapter 11 in April 2023 followed a drawn-out decline that included PE-backed stock buybacks, margin compression, and digital transition failures.

Why are interest rates and import tariffs amplifying pressure on over-leveraged retailers?

Debt-saddled retailers have found it increasingly difficult to refinance or service obligations due to the Federal Reserve’s sustained high interest rate regime. In a leveraged model, even marginal rate increases drastically increase debt-servicing burdens. When combined with margin pressure from import tariffs—some as high as 145 percent on Chinese furniture and décor—these companies face an unsustainable cost structure.

At Home was particularly exposed to tariffs due to its reliance on Chinese imports for low-cost furniture, rugs, and seasonal décor. Analysts estimate that tariffs and sourcing disruptions added over USD 300 million in costs from 2021 to 2025. Meanwhile, Bed Bath & Beyond was unable to restock competitively or match e-commerce pricing, and Joann Fabrics saw same-store sales decline steadily amid increased shipping and raw material costs.

How does At Home’s 2025 bankruptcy differ from past retail collapses like Bed Bath & Beyond and Joann?

Unlike Bed Bath & Beyond, which collapsed in a drawn-out liquidation after attempts to rebrand and relaunch failed, At Home is aiming for a creditor-led reorganization. The Coppell-headquartered retailer is closing only about 10 percent of its stores and retaining day-to-day operations under the oversight of its DIP lenders.

Joann’s 2025 filing, however, closely mirrored a full-scale collapse. With no viable acquirer for its physical assets, the chain began closing nearly all 800 stores. Its brand rights were purchased by Michaels, but the retailer’s jobs, leases, and supplier relationships were dissolved. Bed Bath & Beyond followed a similar path, shutting 360+ locations, selling its brand IP to Overstock.com (now Beyond Inc.), and exiting physical retail entirely.

At Home’s earlier bankruptcy in 2004, when it was still operating as Garden Ridge, successfully allowed the chain to restructure and emerge under new leadership. Whether that playbook can work again in today’s more competitive environment remains to be seen.

What are institutional investors and analysts saying about the private equity bankruptcy trend?

Institutional investors view the surge in PE-backed bankruptcies as a symptom of over-financialization in consumer retail. Analysts argue that private equity firms prioritized fast returns—through dividends, buybacks, and aggressive expansion—at the expense of long-term viability.

In the case of At Home, critics highlight how post-acquisition leverage eliminated strategic flexibility. With capital locked up in debt repayments and store expansions, the retailer was unable to build out competitive digital capabilities or mitigate tariff risks. For Joann, ballooning interest obligations and stagnant sales left few options for reinvestment. Bed Bath & Beyond’s demise, meanwhile, was accelerated by boardroom turnover and failed digital pivots under activist investor pressure.

Sector experts warn that commercial real estate will also feel the impact. At least six million square feet of retail space is expected to be vacated due to bankruptcies by the end of 2025, driven in part by store liquidations from Joann and At Home. Landlords and suppliers are now tightening terms for remaining PE-backed tenants, expecting further distress ahead.

Which retail chains are still at risk, and what does the future look like for private equity in retail?

A growing number of retailers remain vulnerable to financial distress in the wake of the recent At Home, Joann, and Bed Bath & Beyond bankruptcies—especially those still under private equity ownership with high debt exposure. Analysts have flagged several chains across the apparel, fitness, beauty, and home improvement sectors that face similar operating pressures and may struggle to stay solvent through 2025 and into 2026 if macroeconomic conditions remain tight.

Among the apparel sector, retailers such as J.Crew (owned by TPG Capital and Leonard Green), Neiman Marcus (which previously emerged from bankruptcy and is now majority-owned by creditors), and Express (recently delisted from the NYSE and exploring restructuring options) are often cited as high-risk entities. These firms share key characteristics with other distressed peers: shrinking in-store traffic, an over-reliance on brick-and-mortar formats, and insufficient capital investment in digital transformation.

In fitness, several private equity–backed gym operators like 24 Hour Fitness and Town Sports International (parent of New York Sports Clubs) remain in tenuous positions. While the sector rebounded modestly post-pandemic, aggressive expansion funded by debt, coupled with fixed long-term lease obligations and slower-than-expected membership recovery, have made it difficult for some operators to return to profitability.

The home improvement category, once seen as a pandemic-era winner, is also facing margin compression. Chains like Floor & Decor and Menards—though not publicly distressed—are closely watched due to rising input costs, weaker home renovation spending, and tariff-related risks on imported construction materials. Institutional investors say even mid-tier hardware and furniture chains could face disruption if discretionary household spending continues to decline.

Experts warn that without a meaningful shift in operating models, the next wave of bankruptcies could include retailers that once seemed stable. A key red flag is any brand with high interest coverage ratios, stagnant revenue growth, and a lack of e-commerce differentiation. Private equity–controlled businesses that used financial engineering in lieu of operational reinvention are especially vulnerable.

To avoid additional filings, private equity firms are increasingly exploring alternative paths such as out-of-court restructurings, strategic joint ventures, minority equity exits, or partial asset sales. For instance, some sponsors are trying to offload non-core business units or real estate portfolios to raise liquidity without triggering default provisions. Others are re-negotiating covenants or injecting temporary capital in exchange for control concessions, in hopes of stabilizing operations.

However, if macro conditions worsen—such as a second wave of tariffs on Chinese or Southeast Asian imports, or sustained consumer pullback in the face of high interest rates—many of these efforts may fall short. In such cases, even well-known national brands may be forced into Chapter 11 or strategic liquidation.

Looking ahead, success for private equity–backed retailers in the post-2025 landscape will require three foundational shifts. First, they must rationalize and right-size their store footprints, shedding underperforming locations and renegotiating expensive leases. Second, they need to build out resilient omnichannel infrastructure that allows them to compete with digital-native players while still leveraging existing physical assets. Third, firms must reduce leverage and adopt more flexible capital structures, allowing operating leaders—not financial engineers—to dictate strategy.

Analysts believe that those who act proactively in 2025 may still emerge as leaner, better-capitalized businesses by 2026. But those who continue to prioritize short-term financial returns over structural adaptability will likely find themselves on the same path as At Home, Joann, and Bed Bath & Beyond. In an era defined by demand volatility, supply chain complexity, and rising cost of capital, balance sheet fragility is no longer a back-office issue—it is now a primary driver of brand survival.