2020: Fall of fashion brands, retailers and series of Chapter 11 bankruptcies
Dec. 28, 2020
A look-back at the year 2020 reveals how fashion brands and retailers suffered due to dwindling sales, low footfall, high debts, high rentals, inefficient operations, out-dated merchandise assortment and high inventories, among other issues. The coronavirus pandemic added to the woes of these already troubled retailers leading them to file for Chapter 11 bankruptcy protection.
FashionUnited highlights some of the companies that were severely affected by 2020.
Once the king of the high street, Topshop parent company Arcadia could be the biggest corporate collapse during the time of the pandemic.
With its 500 store portfolio its closure creates giant craters in the high street leaving unfillable gaps.
CBL & Associates Properties Inc, a U.S. shopping mall operator, voluntarily filed for Chapter 11 bankruptcy in November. This makes CBL another casualty of mall operator bankruptcies as coronavirus put a major dent in some already struggling mall businesses.
Montreal-based Le Chateau Inc. stores announced it would seek court protection from creditors and shut down its stores. The party gear retailer has been 60 years in the trade.
Le Chateau has spent much of the COVID-19 pandemic trying to refinance or sell its business to a third party that would keep it in operation, but the attempts were unsuccessful, reported the Canadian edition of Yahoo Finance.
Canada’s Tristan & Iseut Inc., a fashion brand founded in 1973, filed a notice of intention on July, 21 to seek protection under the Bankruptcy and Insolvency Act.
The file was made publicly available by the company’s trustee MNP Ltd. According to MNP, this notice is often the first stage of a restructuring process, and protects companies from creditors until they can create a plan to reorganise.
US luxury department store chain Lord & Taylor also filed for bankruptcy. The company filed for Chapter 11 protection in August, according to documents from the US Bankruptcy Court for the Eastern District of Virginia, along with its owner, French fashion rental subscription service Le Tote.
Tailored Brands, Inc., parent company of Men’s Wearhouse and Jos. A. Bank, in August entered into a restructuring support agreement (RSA) with more than 75 percent of its senior lenders. The company said in a statement that to implement the terms of the RSA, the company has filed voluntary Chapter 11 petitions in the United States Bankruptcy Court for the Southern District of Texas.
In December, the company announced it had successfully emerged from Chapter 11 and eliminated $686 million of existing debt.
Fashion chain New York & Co. begun liquidating all its stores in July, two weeks after its parent company, RTW Retailwinds Inc., filed for Chapter 11 bankruptcy protection.
RTW Retailwinds closed most of its brick-and-mortar stores, as well as possibly sell its e-commerce business and related intellectual property.
Also in July Ascena Retail Group, inc. entered into a restructuring support agreement (RSA) with over 68 percent of its secured term lenders. The company said in a statement that the plan is expected to reduce Ascena’s debt by approximately 1 billion dollars and provide increased financial flexibility to enable the company to continue its focus on generating profitable growth.
In December Ascena’s sale of its Ann Taylor, Loft, Lane Bryant and Lou & Grey brands to the private-equity firm Sycamore Partners for 540 million dollar was approved. Sycamore intends to keep the majority of Ascena’s remaining stores open for business.
Brooks Brothers, a collegiate menswear brand founded in 1818, filed for bankruptcy protection in July.
The 200 year-old company was hoping to keep creditors at bay while it searches for a buyer. The upmarket retailer is owned by Luxottica founder Claudio Del Vecchio, who bought the company from Marks & Spencer in 2001. After being rescued from bankruptcy by Authentic Brands Group (ABG) and Simon Property Group in September for 325 million dollars, the new owners have appointed celebrated designer Michael Bastian to the top creative spot.
The filing for creditor protection covering their UK’s business was a wrap to quite a hectic week for Victoria’s Secret. The lingerie brand’s parent group, L Brands Inc. is facing a lawsuit for records of “a toxic culture”, as it emerged earlier. Prior to that, L Brands saw their deal to spin off Victoria’s Secret cancelled amidst the major closures prompted by the global health pandemic. Recently the company reporterd its third-quarter earnings, though revenue fell, coming in at 2.68 billion vs. an expected 2.69 billion dollars.
Denim company G-Star Raw has put the Australian extension of their company into administration. G-Star Raw, which is based in The Netherlands, has named Ernst & Young's Justin Walsh, Stewart McCallum and Sam Freeman as administrators. In its home country the brand is currently undergoing an extensive reorganization.
J. C. Penney Company, Inc. entered Chapter 11 bankruptcy also in May. The company said in a statement that the restructuring support agreement (RSA) with lenders holding approximately 70 percent of JCPenney’s first lien debt was expected to reduce several billion dollars of indebtedness and provide increased financial flexibility to help navigate through the coronavirus pandemic. In September the department store chain spoke with creditors to ease its debt load. The hope is that its turnaround efforts will help. Total revenues in the third quarter were 2.5 billion dollars, which declined 8.5 percent from the prior year quarter’s figure.
Canadian footwear retail chain Aldo filed for protection under the Companies’ Creditors Arrangement Act (CCAA) in Canada to stabilise the business in May.
The court restructuring process began in Canada, explained Aldo, and it was seeking similar protections in the United States and in Switzerland, to help it stabilise the company in response to the ongoing Covid-19 pandemic that has shut its retail outlets.
Thi situation did not affect the companies circularity objectives: In November Aldo received its climate neutral company certification from South Pole for the third consecutive year.
After J.Crew, Neiman Marcus Group Ltd LLC has commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division. As part of the process, the company said in a statement, Neiman Marcus Group has secured debtor-in-possession (DIP) financing of 675 million dollars from creditors to enable business continuity throughout proceedings.
In September the iconic U.S. luxury retail group announced its departure from the bankruptcy protection framework that it voluntarily filed for. Neimas Marcus resurfaced with a debt reduction of 4 million dollars and staff cuts.
In May menswear designer John Varvatos filed for bankruptcy. The company listed assets of as much as 50 million dollars and liabilities of 100 million dollars. John Varvatos Inc is fully owned by Lion/Hendrix Corp, which also filed for bankruptcy according to Bloomberg Law.
J.Crew, the upmarket preppy retailer that once was the king of America’s mall brands, filed for bankruptcy protection according to multiple media sources. The struggling retailer was one of several high-profile U.S. chains including Neiman Marcus and J.C. Penney, that are on the verge of unraveling during the coronavirus pandemic.
True Religion filed for Chapter 11 bankruptcy protection in a Delaware court in April and again in August. The denim brand attributed its financial struggle to store closures caused by the pandemic, on top of existing liquidity constraints. In October the brand exited Chapter 11 with a reorganization plan to cut down on its nearly 140 million dollar in debt, and closed on a 27.5 million loan.