image: Tamara Mellon
On the heels of an array of retail bankruptcy filings in 2016, New York-based designer Bibhu Mohapatra and retailers The Limited and Wet Seal, have all filed for Chapter 11 protection this year, signaling that there is no end in sight to the constant string of fashion companies struggling financially.
Some of the most recent retail bankruptcies have been those of the traditional mall retailers, whose businesses have suffered significantly in light of fast fashion's growth. Moreover, market giants, such as Wal-Mart and Target have wiped out a number of other companies, who were unable to compete with their pricing power and general reach. And as noted by many sources, any existing retail problems only increased when Amazon arrived on the scene.
For the uninitiated, Chapter 11 bankruptcy – one of the most commonly utilized forms of bankruptcy – allows a company to continue operating while it executes a reorganization plan. Chapter 11 can take a number of forms, but in short: A chapter 11 case begins with the filing of a petition with the bankruptcy court by the debtor (the entity that owes the debt – aka the retailers in the cases at hand). This is followed by the debtor proposing and executing a reorganization plan, which may be used to compromise or even eliminate certain classes of debt.
All the while, the debtor usually remains in possession of his assets and continues to operate any business, subject to the oversight of the court and the creditors committee. Typically, a company that has filed for Chapter 11 bankruptcy trying to stay in business, and as indicated below, this complex proceeding can be very effective in solving short term business problems in an otherwise viable company or winding down a company with valuable assets.
Retail Bankruptcies
With at least three bankruptcies already under our belt in 2017, here is a look back at some of the most recent retail-related filings in the recent past, as well as some significant ones dating back a bit further.
1977 – Tommy Hilfiger
Before becoming an American fashion icon, Tommy Hilfiger launched his first brand, People's Place, in 1971 – but after six years in business he filed for bankruptcy. Speaking of the expiree, he has said: “We went bankrupt. I was devastated. I was embarrassed. I had started with nothing and worked so hard, and we were so close to making it really big, but I had taken my eye off the ball. I believed that the business would just continue to do well. But it didn't, because I wasn't paying attention to the ‘business’ part of the business … I forced myself to learn the nuts and bolts of the business, and not solely on the creative side. I got hyper-focused on it. I learned how to read a balance sheet. I figured out how to control expenses and figured out a way to build a business on a shoestring budget.”
In 1985, Hilfiger launched his eponymous label with backing from the Murjani Group. In March 2010, Phillips-Van Heusen (PVH) bought the Tommy Hilfiger Corporation for $3 billion, in a deal that was nearly seven times what PVH had paid for Calvin Klein in 2003.
NOW: Tommy Hilfiger, himself, remains the company’s principal designer, leading the design teams and overseeing the entire creative process. In fiscal 2015, the Tommy Hilfiger brand accounted for 43.5% of PVH’s total revenue and 44% of its operating profit. As of December 1, 2016, Tommy Hilfiger revenue increased in the quarter to $927 million, and international revenue increased 16% to $525 million.
1989 – Fiorucci
Fiorucci, the Italian fashion label founded by Elio Fiorucci in 1967, went into administration in 1989. [Note: A company in “administration” is either about to become insolvent, or is already insolvent (i.e. cannot pay its debts). The UK-based insolvency proceeding is very similar to the U.S. Chapter 11 bankruptcy process].
NOW: Fiorucci was rescued by the Tacchella brothers of Italian jeans company Carrera S.p.A., who ultimately sold the company to a Japanese jeans group, Edwin Co., Ltd, for roughly $41 million in 1990. The Fiorucci and Edwin Co., Ltd have since been battling over the rights in the Fiorucci name with the Italian Supreme Court ruling in October 2016 that the designer's estate may not use his name.
Nonetheless, as of the Spring 2017 season, the brand will begin selling again, revived almost two years after the death of its founder, Elio.
January 1992 – Macy’s
At the time of filing, Macy’s had experienced a $1.25 billion loss in its most recent fiscal year. The bulk of the loss was a result of costs associated with the massive reorganization proceedings, including store closings. Macy's also was hurt by the weak economy, and disasters in two areas where it has a strong presence: Florida, hit by Hurricane Andrew, and Los Angeles, stung by riots.
NOW: After thriving for years, Macy’s, the largest department-store company in the U.S., has cut its earnings outlook, vowed to eliminate 10,000 jobs, or about 4 percent of its workforce, and close over 60 stores before the spring. Following a sluggish holiday season, the beleaguered retailer is taking more drastic steps to slim down as it copes with slow traffic and weak sales in key categories, such as handbags. It previously announced plans to shut 100 underperforming stores, and the chain has been evaluating ways to squeeze more money out of its real estate.
Moreover, if recent reports are accurate, Hudson’s Bay – the owner of Saks Fifth Avenue, Lord & Taylor, Gilt Groupe, and other retailers – is said to be in discussions to buy Macy’s.
January 1994 – JNCO
Within months of filing for bankruptcy, the brand, which was popular among skater-types, closed all 1,500 its locations, making it one of the largest retail bankruptcies in history.
NOW: In early 2015, the fashion press was quick to proclaim that “JNCO is back in the spotlight,” set to officially relaunch in stores beginning in 2015. While the revamp has not yet caught on, the JNCO jeans style – the long, massively baggy denim – is making its way onto the runway. “Balenciaga designer Demna Gvasalia decided to tackle JNCOs. Keeping true to their original design (minus the massive back pockets), they’re just as voluminous as you remember,” per The Cut blog.
May 1999 – Loehmann’s (Round 1)
In the first of three round of bankruptcy proceedings, Loehmann’s – a chain of off-price department stores in the United States – filed for Chapter 11 reorganization in 1999, emerging in 2000 after closing 25 stores.
NOW: See below.
image: Le21eme.com
January 2001 – Converse
Sneaker maker Converse announced in early 2001 that it planned to close three North American production plants, which employed about 1,000 people, and to shift production to Asia as part of a bankruptcy reorganization. Chairman and CEO Glenn Rupp insisted that the Converse brand and its sales were strong, but the company was simply too overwhelmed by debt dating back to its 1995 acquisition of ApexOne and subsequent litigation. It also suffered through a dramatic slump in the athletic footwear market worldwide in 1998 and 1999.
In July 2003, Nike paid $309 million to acquire Converse. Nike relaunched the brand’s footwear of choice and "Chucks" quickly became a cultural phenomenon once again. As a result, Nike expanded the Converse brand to other businesses apart from shoes, much akin to its other brands.
NOW: As of 2015, the company is bringing in roughly $2 billion per year, and is consistently making headlines for actively policing unauthorized uses of its intellectual property.
February 2008 – Heatherette
Fubu creator Daymond John, who acquired Heatherette in the mid-2000’s when it was in its heyday of showing during New York Fashion Week and garnering fans like Paris Hilton, said that despite injecting upwards of $6 million in the company, he and the label’s founders, Traver Rains and Richie Rich, could not make it work. Per John, the designers indulged in extravagant costume clothing for the runway but failed to develop a hot ready-to-wear retail line.
NOW: Who knows? The label is soundly defunct.
December 2008 – Bill Blass
Bill Blass Ltd. filed for Chapter 7 liquidation (the chapter of the Bankruptcy Code provides for "liquidation" - the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors), citing $192,000 in total assets with debts of $829,000. WWD reported at the time that NexCen – the owner of Bill Blass – was suffering so significantly that it planned to sell the furniture in the Bill Blass showroom. The bankruptcy filing came on the heels of creative director Peter Som exiting the label, retailers losing interest in the brand, and parent company NexCen enduring significant trouble in selling off the brand.
Bill Blass Limited – now known as Bill Blass Group, LLC – was acquired in December 2008 by Peacock International Holdings, LLC. In late October 2014, designer Chris Benz was appointed Creative Director of Bill Blass, which relaunched during the Spring of 2016. Upon his appointment, Benz said he was "...planning an e-commerce push, collaborations with up-and-coming designers and established artists, an accessories range and, possibly, a line of home goods."
NOW: Still standing, the brand currently sells on Amazon and its own e-commerce site.
February 2009 – Gianfranco Ferré
The Italian design house filed for administration in early 2009 in what Italian Industry Minister Claudio Scajola called a move aimed "to safeguard the group and its ability to continue in business.” In 2002, Tonino Perna’s IT Holding purchased 90% of the company, while Ferré, himself, retained the position of artistic director until he died in 2007.
NOW: As of now, the brand appears to consist almost exclusively of licensed goods, such as fragrances, as well as its mid-market Ferre Milano collection of garments and accessories, which is sold on Yoox.
May 2009 – Christian Lacroix
Lacroix's fashion house operated at a loss every year since it was founded in 1987 under the umbrella of luxury conglomerate LVMH Moët Hennessy Louis Vuitton. LVMH's plan was to create a fashion house which would sell products from haute couture to handbags and perfume. But Lacroix never had a hit perfume or an “it” bag.
In 2005 LVMH sold the firm for a nominal sum to the Falic Group, owner of Duty Free Americas, a retail chain. Lacroix persuaded the Falic Group to take the brand further upmarket. The new owners closed two cheaper but profitable lines, Jeans and Bazar, and raised prices for ready-to-wear. Per Forbes, “after 22 years of bucking trends and ignoring the bottom line, Christian Lacroix filed for the equivalent of Chapter 11 bankruptcy protection in France.”
NOW: Lacroix, himself, is consulting and working as a costume designer for some of Europe’s top cultural institutions. The brand, which no longer stages runway shows or sells runway garments, sustains itself through the sale of Christian Lacroix branded home goods.
August 2009 – Escada
Following a 70-million-euro loss for the 2007/2008 financial year, Escada reported further losses with Chief financial officer Markus Schuerholz stating in early 2008 that the company was in danger of insolvency. After an emergency stock swap plan intended to save the company from bankruptcy failed to find sufficient backing among investors, the company filed for bankruptcy.
NOW: The German label – under the creative direction of Daniel Wingate – recently released its Pre-Fall 2017 collection.
image: yohjiyamamoto.co.jp
October 2009 – Yohji Yamamoto
Yohji Yamamoto’s label began to experience financial trouble when “fashion conscious Japanese women turned to cheaper casual clothes amid the economic slump. In contrast to high-end fashion houses like Yamamoto, demand for low-cost clothes was booming in Japan” during the first decade of the 2000’s. Saddled with a $76 million debt, Yamamoto filed for bankruptcy protection in Japan.
NOW: Yohji Yamamoto regularly shows during Paris Fashion Week, with stockists including FarFetch, Lyst, and FWRD, and brick-and-mortar stores worldwide.
April 2010 – Rock & Republic
Rock & Republic filed for Chapter 11 bankruptcy in hopes that restructuring would enable the Los Angeles-based denim company to “ease pressures on its balance sheet.” The brand, which sold its wares at upscale stores such as Saks Fifth Avenue and Bloomingdale's and collaborated with celebrities such as Victoria Beckham, cited assets between $50 million and $100 million and liabilities of $10 million to $50 million.
NOW: Under a long-term licensing agreement with VF Corp. – which bought Rock & Republic's trademarks at a bankruptcy auction last March – VF is manufacturing Rock & Republic's denim component, with Kohl's design and sourcing teams responsible for the rest of the apparel categories. The line is now sold exclusively at American department store retailing chain, Kohl’s.
November 2010 – Loehmann’s (Round 2)
Discount apparel retailer Loehmann’s sought bankruptcy protection after its Dubai government-linked owner failed to reach a debt-extension deal with creditors.
NOW: See below.
April 2012 – Aquascutum
Troubled British clothing label Aquascutum – which was launched as a menswear brand in London in 1851 and family-owned until 1990, entered into administration. Following “challenging conditions in the UK,” the brand hoped for a turnaround in the company's fortunes, but were derailed further by the fact Aquascutum's royalty rights for the Asian market, a high growth area for luxury goods, have belonged to Hong Kong's YGM Trading since 2009.
NOW: Aquascutum was acquired by a Chinese consortium in 2016 for $120 million. In 2015 the brand closed 14 of its stores in China amid declining sales, but opened one in Europe. In the UK, its three remaining standalone stores are in Westfield London, Great Marlborough Street and Jermyn Street.
August 2012 – Betsey Johnson
Betsey Johnson, who started her eponymous label in 1978, filed for bankruptcy after being “bogged down in five-year projections." She further noted: “Or maybe it all began when stores started knocking off my $250 prom dresses for $49." Johnson's partner Steve Madden stated that the company "had delusions of building a huge company and going public. So they borrowed a lot of money, they had too many stores, and their rents were too high."
Johnson filed for bankruptcy and closed all of her 63 stores after falling into millions of dollars into debt. In 2013, Johnson returned to New York Fashion Week to celebrate the launch of her new collection, intended to “hit department stores and retailers at affordable prices.”
NOW: Betsey Johnson currently maintains its own e-commerce site, where it sells garments, accessories, and home goods. It also sells via Macy’s, Dillard’s, and other similarly situated retailers.
July 2013 – Nicole Farhi
Three years after Nicole Farhi and Steven Marks sold off the label they launched together (and one year after Farhi ceased all work for the brand), the company filed for bankruptcy in the UK. According to analyst Peter Saville, a partner at Zolfo Cooper, "As with many other fashion retailers, the decline in high street spend coupled with rising costs has led to increased financial pressures on the business.”
NOW: The brand – sans Ms. Farhi – maintains stores in London and sells through Harvey Nichols and its own e-commerce site.
December 2013 – Loehmann’s (Round 3)
Loehmann's filed for its latest round of Chapter 11 bankruptcy protection in federal bankruptcy court, indicating its plans to sell its remaining assets in an auction subject to the court's approval. Executives with the retail chain, which operated fleet of 39 stores at the time, estimated the company was carrying $100 million in debt, an amount either equal to or greater than the value of its assets.
NOW: According to Loehmann’s, the company “is back, and here to stay.” It operates exclusively online.
March 2014 – Ashley Stewart
According to a statement from the company upon filing for bankruptcy, Ashley Stewart began suffering financially in 2012 due to a decline in revenue and profitability. While the company brought on “new senior management and refocused its merchandizing and e-commerce efforts,” it was forced to file for bankruptcy nonetheless.
NOW: The company maintains a network of brick-and-mortar stores throughout the U.S., and also sells online by way of its own e-commerce site.
July 2014 – Love Culture
Founded in 2007 by former Forever 21 executives Jai Rhee and Bennett Koo, Love Culture launched as a brand aimed at women in the 18-to-35 age range. The company had 82 brick-and-mortar stores stretching from Massachusetts to Hawaii at the time of filing for bankruptcy. In its filings, Love Culture said it “plans during the bankruptcy process to close money-losing stores, restructure its debt and investigate options ‘including a possible sale of substantially all of its assets as a going concern.’"
NOW: The company has since revamped as an online-only retailer.
December 2014 – dEliA*s
Delia’s was another clothing retailer that filed for bankruptcy in 2014, citing stagnating shopping-mall traffic and consumers looking to the Internet for bargains.
NOW: Delia’s has revamped itself into an e-commerce only business, selling exclusively on its own website.
December 2014 – Deb Stores
The Philadelphia-based operator of Deb Shops filed for bankruptcy in December 2014, blaming a shortage of capital. “Deb’s recent performance has been strained due to a combination of factors, including historic lack of capital invested in business resulting in old, tired stores with unfavorable mall traffic trends and general weakness in the competitive juniors’ space,” Chief Executive Officer Dawn Robertson said in court papers.
NOW: Deb Stores has revamped itself into an e-commerce only business, selling exclusively on its own website.
January 2015 – Wet Seal (Round 1)
Wet Seal (like other similar chains) filed for bankruptcy at the end of 2015, hurt by stores like H&M and Forever 21 that woo young people with fast-changing selections of low-priced fashion. Immediately prior, Wet Seal announced that it was closing about 338 stores, or two-thirds of its total.
Private equity firm Versa acquired the Wet Seal brand in April 2015, announcing that it would maintain its headquarters and continue operating its 173 stores and growing its online platform.
NOW: See below.
February 2015 – Cache
The women’s clothing chain known for helping popularize Armani designs in the U.S. filed for bankruptcy as the sector struggled with growing competition and lower spending by teen shoppers. Cache listed assets of $10 million-$50 million and liabilities of $50 million-$100 million. The mall based retailer, which had 218 outlets, had not reported a profit in the previous nine quarters.
NOW: Cache ended all business operations and closed all stores. According to the brand's site: "Under previous ownership, Cache went out of business and closed all stores. Next steps for preserving the well-known Cache brand are being explored under new ownership.”
March 2015 – Karmaloop
Weighed down by millions in debt and by poor business ventures, the Boston streetwear company, Karmaloop Inc., filed for Chapter 11 bankruptcy in March 2015.
NOW: Although Kanye West and hip-hop entrepreneur Dame Dash expressed interest in buying a majority stake in the company, ultimately only West Palm Beach, FL-based Comvest Partners and Chicago-based CapX Partners bid to save the company.
April 2015 – Frederick’s of Hollywood
Known for its racy women’s lingerie, Frederick’s of Hollywood filed for bankruptcy after closing all its stores and reaching a deal to sell the company as an online-only venture to Authentic Brands Group LLC. The previous year, Frederick’s was taken private for about $24.8 million by investors led by a unit of New York-based Harbinger Group Inc. – at the time of the deal, Frederick’s had 94 women’s clothing stores; at its height it had more than 200.
NOW: Per the deal with Authentic Brands Group LLC, Frederick’s now operates exclusively online.
September 2015 – Quiksilver
Shares in Quiksilver plunged almost 80 percent in 2015 as the company wrestled with both shipping and accounting issues, and then filed for bankruptcy. It was forced to delay its first-quarter earnings report in March due to a "revenue cut-off issue," and CEO Andy Mooney left the company that same month.
NOW: Quiksilver was revived thanks to a $50 million investment by Oaktree Capital Management LP. Most recently, Quiksilver partnered with New Schoolers to host a talent-seeking ski competition.
October 2015 – American Apparel (Round 1)
American Apparel filed for its first round of bankruptcy in the fall of 2015, after announcing in August that it might not have enough capital to sustain operations for 12 months. The Los Angeles-based company, which confirmed that it had not made a profit since 2009, joined a growing number of U.S. retailers selling to teens and young adults that have been unable to adjust to changing spending patterns and intensifying competition. The company said its stores and manufacturing operations would continue to operate normally under a restructuring deal reached with most secured lenders.
NOW: See below.
image: Tamara Mellon
December 2015 – Tamara Mellon
The 48-year-old launched her eponymous accessories label in 2013 after co-founding luxury shoe label Jimmy Choo. Her designs were stocked at Net-a-Porter.com and included ready-to-wear pieces as well as shoes and handbags. She filed for Chapter 11 in December 2015.
NOW: Tamara Mellon relaunched her brand in Los Angeles in mid-2016, selling shoes and handbags exclusively on her own site.
January 2016 – Joyce Leslie
Under pressure from a fiercely competitive market and the rise of e-commerce, New Jersey-based women's apparel retailer Joyce Leslie Inc. began looking for a buyer to stave off liquidation, having filed for Chapter 11 bankruptcy after a sharp decline in revenue.
NOW: Unable to find a buyer after 30 days, Joyce Leslie closed all stores in February last year. CEO Celia Clancy said in a statement, “Unfortunately, our efforts to find a strategic partner to help save the business were not successful. We are saddened to say that we now have to close our doors after 65 years.”
April 2016 – Pacific Sunwear
Once a staple merchant of California cool, PacSun wasn't able to adapt as fashion trends left surfwear behind and over-expansion sapped its resources. It amassed crippling debt as it recorded losses each year since 2008. Every effort at reinvention failed, and the company filed for bankruptcy, as the company's shares were down 96 percent over the previous 12 months.
NOW: PacSun restructured and emerged from bankruptcy in September, under new ownership of Golden Gate Capital. The brand has seen a boost in online sales.
May 2016 – Aeropostale
Aero, like other moderately priced brands, was rocked by the fast fashion stars like H&M, Zara and Forever 21 responding to fashion trends at warp speed, with very cheap price tags to boot, leaving older brands in the dust. Aeropostale filed for Chapter 11 and planned to close more than 100 stores. This came shortly after shares in the company were delisted by the New York stock Exchange in April.
NOW: The mall brand exited Chapter 11 in September 2016 – with only 229 stores, as opposed the approximately 800 they previously boasted. They are now owned in part by mall operators Simon Property Group and General Growth Properties, who jointly bid $243 million.
November 2016 – Nasty Gal
Nasty Gal had a rough couple of years: It cut jobs in both 2015 and 2016, and founder Sophia Amoruso ceded the role of CEO at the beginning of 2016. The company had also been on the receiving end of an array of lawsuits in recent years, both from former employees, who have all cited various forms of discrimination, and intellectual property rights holders, including jewelry designer Pamela Love, who filed a copyright infringement suit against Nasty Gal in summer 2016.
In November, Nasty Gal’s lender, Hercules Technology Growth Capital Inc, a Palo Alto-based lender to venture-backed firms, rejected additional proposals from the brand, which requested a loan just two days into its bankruptcy filing. The brand, instead, filed for Chapter 11.
NOW: Online retailer Boohoo.com purchased Nasty Gal for $20 million as a stalking horse bidder. Per WWD, “they did not include the company’s two Los Angeles area store leases.”
November 2016 – American Apparel (Round 2)
American Apparel filed for its second bankruptcy protection in just over a year in November 2016, weighed down by intense competitive pressures facing U.S. teen retailers and a rocky relationship with its founder. The second bankruptcy came as the retailer struggles to overcome years of losses and rising online competition.
NOW: Canadian apparel maker Gildan Activewear won a bankruptcy auction to buy American Apparel’s manufacturing equipment and intellectual property rights for $88 million in cash. The Canadian company beat out other reportedly interested parties, such as Forever 21 and Amazon. American Apparel stores are currently offering steep discounts to clear out leftover merchandise, and all 110 will shutter.
December 2016 – Yogasmoga
New York-based athletic apparel firm Yogasmoga filed for Chapter 11 in a bankruptcy court in Manhattan, following an involuntary Chapter 7 bankruptcy in November. Despite its pure-digital start, Yogasmoga soon took its yoga clothing to two brick-and-mortar stores in 2015, upping up its physical network in ten shops during the past twelve months. Many stress that the founders’ liking for expensive artisan fabrics and costly photography, together with its rapid expansion set the project to fail.
NOW: The yoga company has closed all of its stores except one, which is located in San Diego. “The brand and product is still connecting very strongly with the consumer, so we are shrinking our footprint to online and taking Yogasmoga forward with a smaller footprint online and through the La Jolla store,” the company’s founder, Rishi Bali, said in an email.
January 2017 – Bibhu Mohapatra
The New York City-based designer, Bibhu Mohaptra, filed for bankruptcy in early 2017, telling the Wall Street Journal that he plans to continue operations and he feels the debt restructuring will make his company more attractive to investors. Mohapatra also said the restructuring will allow him to start a more affordable second collection.
NOW: Bibhu Mohapatra staged its regularly-scheduled Fall/Winter 2017 runway show during New York Fashion Week.
January 2017 – The Limited
The latest brick-and-mortar retailer to reorganize as shoppers shift to fast-fashion retailers and online competitors, The Limited filed for Chapter 11 bankruptcy in January. Parent company Limited Stores LLC has agreed to a "stalking horse" bid for its intellectual property and some related assets from an affiliate of private equity firm Sycamore Partners. The company announced that all 250 brick-and-mortar stores will be closed.
NOW: After shuttering its brick-and-mortar stores, the company has also “temporarily closed” its website, writing, “Please know that it has been such an honor to provide fashion for you and other strong, confident women for more than 50 years.” In addition, the retailer noted that all orders not already shipped have been canceled.
February 2017 – Wet Seal (Round 2)
Wet Seal filed for bankruptcy protection in early February, following reports that the struggling teen apparel retailer had closed all its stores after it was unable to find a buyer. It has since asked the Delaware bankruptcy court to approve an auction for its intellectual property, including its name and assets connected to its website.
