Teen apparel retailer Papaya Clothing, owned by Cornerstone Apparel Inc., has become the latest teen fashion retailer to file for bankruptcy protection in the US. It has now joined the list of the other 11 mall-based chain stores such as American Apparel, Wet Seal, Sports Authority and PacSun that went bankrupt in the first half of 2017.
The company, which expanded rapidly and opened around 50 of its 80 stores in the last six years, found itself with inadequate funds to address all of its financial obligations. “The expansion efforts took a heavy financial toll on the retail business operations of Papaya as it racked up construction and operating costs,” reportedly said Tae Yi, President and Chief Financial Officer of the company.
In addition, the dwindling store sales, as an outcome of a general industry-wide switch in consumer buying preferences from ‘in-store’ to ‘online shopping’ and the increased competition from the e-commerce sector forced the fashion company to file for bankruptcy.
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It is pertinent to mention here that Papaya fetched more than US $ 134 million in sales last year and is eager to operate as a retail company instead of using bankruptcy (protection) to become a wholesale apparel company or an intellectual property licensor, the media reports claim. It has already closed 22 of its operational stores and further seeks support from the court to exit tenancies for 8 more stores. The shuttering of stores will also lead to job loss for around 1,300 employees, who are currently employed at Papaya.
