From Bankruptcy To Downsizing: Brands That Announced Store Closures In 2019

by Apparel Resources

19-August-2019  |  12 mins read

It would not be an understatement to proclaim that a ‘retail apocalypse’ is well underway, and brands that once saw the epitome of success, are now faced with the woes of not even being able to sustain themselves in the market.

2019, a year that has been packed with surprises so far, has also relayed many shocks to those who have had to bid adieu to some of their favourite brands. Thanks to the rapidly changing consumer trends and mounting competition from e-commerce players, traditional bricks-and-mortar retailers and brands are forced to shutter stores at rates that have never been seen earlier.

In fact, retail and technology advisor Coresight Research estimates in one of its reports that US retailers announced 5,399 store closures in the first quarter of 2019. A number that is alarmingly close to the number of store closures (5,726) that happened overall in2018, signalling that there is no end in sight to the constant string of fashion and other retailers struggling financially.

Big names caught in the wave of losses include popular budget footwear retailer Payless, which announced plans to liquidate almost all of its 2,500 American stores in February. While some closures are the result of Chapter 11 filings, such as for Payless and Gymboree, others are restructuring as they seek to lower costs and prioritise better performing stores and channels in order to stay afloat and thrive in today’s challenging environment. AO brings to you some of the most popular fashion retailers worldwide that are forced to shut their stores for either of these reasons.

Roberto Cavalli

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The Florentine luxury fashion house has been reeling under losses since 2013. Estimated losses in 2018 mounted to US $ 17.8 million, excluding additional expenditure of US $ 13 million on marketing. Failing to successfully implement a turnaround, the retailer had to close down all its US stores to liquidate its North American Operations, as reported by Business of Fashion.

The company had filed for bankruptcy and abruptly closed all its stores, letting go of 93 US employees. At the time of store closures, US CEO Salvatore Tramuto resigned, as per the report.

In a statement upon his departure as CEO, Tramuto said, “I have given much consideration to this decision and reached the conclusion that the mission I have signed on has changed and enters a new direction with a new perspective. I now wish to focus on other projects that I put aside in order to achieve our common goals with Roberto Cavalli Group.”

However, the Italian brand might be given another chance. After months of seeking investors, Damac Properties Dubai has emerged as the highest bidder for Roberto Cavalli. While a property developer is an unusual choice, Damac and Cavalli have previously worked together on branded hotels and residences, a lucrative and growing category, though the sale has not been confirmed by Cavalli yet.

Diesel

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The New York-based arm of Italian denim-maker, Diesel, whose five-pocket pants were an icon of pop culture in the 1990s and early 2000s, filed for Chapter 11 protection from creditors with the US bankruptcy court, blaming plummeting sales, pricey leases, unwavering landlords and a botched turnaround.

The brand lost money for six straight years as annual sales plunged by 53 per cent to US $ 104 million. Theft and cyber fraud cost US $ 1.2 million over a period of three years. As a result, Diesel USA intends to exit some of its 28 stores, where landlords’ refusal to offer lease concessions has led to heavy losses.

Diesel tried to renegotiate its lease terms with landlords but to no success. During the period from 2008 to 2015, the prior management of the company infused US $ 90 million as capital expenditure, primarily to bricks-and- mortar stores. Most of these strategies seemed to backfire for the brand and after filing for bankruptcy, it has strategised a big overhaul for its marketing techniques.

Its turnaround plan calls for it to collaborate with social media influencers which will help reach the millenials, enhance its denim collection for female customers and relocate some stores to smaller, cost-effective locations with reduced rent.

Charlotte Russe

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The San Francisco- headquartered retail chain has declared its plans to shutter all its 500 stores. In February this year, the brand had filed for Chapter 11 bankruptcy and had planned to close 94 stores across different regions in the country.

The company has shut its remaining 416 stores in 44 states and in Puerto Rico, with US $ 160 million in inventory up for grabs at peanuts. The private equity-backed brand has had to liquidate its stores after being unable to find an investor, as reported by CBS news.

A bankruptcy court in Delaware, approved the sale of the company’s merchandise to the liquidation company, SB360 Capital Partners LLC. Charlotte Russe’s intellectual property and rights to its leases will be sold separately.

The liquidation sales were wrapped up quickly, with gift cards redeemed until March 21, 2019.

JCPenney

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The department store chain has fared better as compared to some of the other brands mentioned in this list, but has fallen prey to the slump in the market. Its financials have been dwindling as the company reported in February that total net sales for fiscal 2018 decreased by 7.1 per cent, with a net loss of US $ 255 million for the year.

In order to decrease costs and resuscitate itself from the financial tumble, the store has announced the closure of 18 stores, in addition to the 3 that were previously announced in January. Apart from the standard stores, 9 home and furniture stores will close this fall, raising the total to 27.

The retailer currently operates more than 800 stores in America, more than any of its competitors like Nordstrom, Dillard’s, Belk, and Macy’s, which are also victims of a volatile market. Analysts have predicted the chain would pull the plug of more than 100 stores this year, and the company’s management team is in agreement, fearing that they will continue to slim down in the near future in their effort to decrease losses.

Gymboree

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In one of the harshest liquidations of the year, kids’ clothing retailer Gymboree filed for Chapter 11 bankruptcy in January.

The brand had to shutter 540 Gymboree stores and outlets in the US and Canada, along with 265 Crazy 8 stores in the US. A popular brand with parents, it will continue to run its high-end kids apparel chain, Janie and Jack, which has 139 stores.

“We are saddened and highly disappointed that we must move ahead with a wind down of the Gymboree and Crazy 8 businesses. At the same time, we are focused on using this process to preserve the Janie and Jack business – a strong brand that is poised to grow – by pursuing a sale of the business as a going concern,” Shaz Kahng, appointed in November 2018 as Gymboree Group CEO, said in a statement released by the company.

The San-Francisco based company had previously filed for bankruptcy in 2017 as it faced a debt of US $ 1 billion from a leveraged buyout by Bain Capital Partners in 2010. It has since shed some US $ 900 million debt from its balance sheet. The retailer had to close 400 of its 1,300 stores in various locations, at the time, in its efforts to position itself for better financial success and address its debts.

Gap

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The popular American clothing and accessories retailer, Gap Inc., has seen sales and profits plummet in the past year, forcing it to take the decision to shutter 230 stores in the coming two years.

Stores which have not been able to deliver appropriate levels of contribution to the company, and have resulted in like-for-like sales falling by 5 per cent over both the fourth quarter and the full year, have been targeted for closure.

The 50-year-old retailer has been struggling to turn a decent profit for the past few years. Gap estimates that it will lose about US $ 625 million due to the store closures but will ultimately end up saving about US $ 90 million through the process. As bricks-and-mortar stores go out of business, the retailer hopes to shift more than 40 per cent of its sales to its e-commerce website.

Old Navy is the only unit of Gap Inc. that has been thriving but still saw same store sales fall flat in Q4 of 2018-19, although they rose by 3 per cent over 12 months.

Dressbarn

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Dressbarn is starting to shut stores, kicking off the process of going out of business completely, after the shares of its parent company, Ascena Retail Group, are down by more than 70 per cent this year.

Ascena announced in May that it planned to wind down Dressbarn and to shut all 650 or so of its women’s clothing stores in order to focus on its more profitable brands like Ann Taylor and Loft. It is undisclosed how and when it intends to do so and which locations are slated to face the brunt first.

Recently, a list was posted on Dressbarn’s corporate website with the first 28 locations set to close in the coming weeks, at various malls, shopping and outlet centres across the US.

Dressbarn, which has been around for more than five decades, has struggled to find footing in apparel retailing as more women steer toward fast-fashion retailers such as H&M and Zara, discount chains such as T.J. Maxx and Ross Stores, and even Target. Amazon also continues to take a larger share of the apparel market online.

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