These are the companies downsizing or filing for bankruptcy in 2019
By Marjorie van Elven
24 May 2019
These are hard times for brick and mortar retail. While consumers still like to shop in brick and mortar stores, many retailers have been struggling to stay afloat due to dropping footfall in shopping malls and competition with online retailers. Here’s a recap of the fashion businesses which announced downsizing plans or filed for bankruptcy protection in the first five months of 2019.
The lingerie brand under L Brands has been struggling to resonate with consumers lately, as they move to more comfortable and inclusive competitors. Victoria’s Secret announced plans to close 53 of its 1,170 stores in North America this year, following 30 store closures in 2018. Additionally, the brand has cancelled its annual fashion show following five years of declining viewership.
Arcadia Group (Topshop, Topman, Dorothy Perkins, Miss Selfridge, Burton) isn’t doing so well, especially after the scandals surrounding the company’s chairman, Sir Philip Green. The company is reportedly planning to close 23 stores across the UK and Ireland, as well as all its Topshop and Topman locations in the United States. The company shut down 200 stores in the UK over the past three years.
Ascena Retail Group, the company behind brands such as Loft, Lane Bryant and Lou & Grey, has decided to close down Dressbarn after 50 years of business as “the chain had not been operating at an acceptable level of profitability in today’s retail environment”, according to Chief Financial Officer Steven Taylor in a statement. All of Dressbarn’s 650 stores across the US will shut down, affecting over 6,800 employees. The other brands in the Ascena group will not be affected.
Burberry is reportedly planning to close down 38 of its stores worldwide (or one in ten) as the British label moves ahead with its plans to reposition itself into a more upmarket tier. Five stores have already shut down in Brazil and Spain, according to The Guardian. Earlier this week, Burberry reported that its revenues remained flat at 2.7 billion pounds for the 52 weeks to March 30, with investors particularly concerned with slow growth in the Chinese market.
JCPenney started the year by announcing it will close a total of 27 stores, including 18 full-line stores and nine ancillary home and furniture stores. The company saw a 7 percent decline in sales to 11.7 billion US dollars in 2018.
Abercrombie & Fitch
Abercrombie & Fitch is having some serious growing pains in recent times. The company has closed 475 stores over the past eight years, and plans to store another 40 this year. But these closures do not mean the American brand is turning its back to brick-and-mortar retail. Despite closing down 40 stores in 2019, the company intends to invest in store experiences across 85 retail locations.
Foot Locker is doing well -- so well that it has been investing in promising companies such as Rockets of Awesome, Goat Group and Super Heroic. However, the footwear retailer plans to close more stores than it will open this year. CFO Lauren Peters announced in March that the company will close 165 stores worldwide, most of them in the United States, and open 80 new retail locations. In fact, Foot Locker has been reducing its physical retail portfolio every year for the past five years.
Gap announced in March that it will close 230 stores over the next two years and focus on its online operations instead, where nearly 40 percent of its sales come from. The company also decided to spin off the brand Old Navy into a separate company.
Roberto Cavalli filed for Chapter 7 bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York in early April, following at least six years of significant financial distress. “Due to severe liquidity constraints, the company is unable to pay its debts, including ordinary operating expenses, as they come due,'' read the filing.
Roberto Cavalli has been operating at a loss since 2013. All of its US stores were closed in April as the brand plans to liquidate its American operations, which means 93 employees were dismissed. Its European activities continue, but the company intends to file a plan with Italian courts that would allow it to keep running while it looks for investors, according to an email statement sent to the New York Times.
Roberto Cavalli has been in talks with potential buyers since February. A few interested parties have come forward, including US brand management company Bluestar Alliance, which offered to buy the company for five million US dollars and inject 105 million US dollars; German fashion designer Philipp Plein, together with private equity firm Blue Skye Financial Partners. The duo offered 90 million euros for a 70 percent stake in the company; finally, Italian group OTB, owner of brands such as Marni and Diesel, offered to invest 70 million euros as part of a plan to secure 164 million euros in funding.
Private equity company Clessidra has a 90 percent stake in Roberto Cavalli since 2015.
American fast fashion retailer Charlotte Russe Holdings Corporation filed for Chapter 11 bankruptcy in February, with plans to close 94 of its 512 stores while continuing to seek a buyer. One month later, however, the company announced it would liquidate the business and shut down all of its stores, affecting a total of 8,700 employees. Founded nearly 40 years ago, Charlotte Russe saw its sales plunge in recent years due to the changing retail landscape and declining footfall in American shopping malls. Good news came in April, when the company managed to sell its Charlotte Russe and Peek Kids brands to YM Inc. and Mamiye Brothers, respectively. Following the announcement, Charlotte Russe’s Twitter profile announced the brand is “planning a brand new online shopping experience, as well as reopening 100 retail locations across the US”.
Diesel USA, the American subsidiary of denim and accessories brand Diesel S.p.A, filed for Chapter 11 bankruptcy in March. In the filing, Diesel said it is “unable to sustain the kinds of losses it has suffered in recent years”. Operating losses at Diesel USA increased from 4 million dollars in 2014 to 27 million dollars in 2015. In 2018, the company had an operating loss of 24 million dollars. Diesel does not intend to shut down, but it will close several of its 28 stores and relocate other ones to smaller retail locations.
Affordable footwear retailer Payless ShoeSource filed for Chapter 11 in February, its second bankruptcy in less than two years. The company intends to shut down all of its 2,500 stores in the United States, as well as 400 more in Canada, by June. Stores outside North America will continue their operations as usual. Payless ShoeSource operated more than 4,400 stores when it filed for bankruptcy for the first time, in April 2017. While it did emerge from restructuring having cut down its debts by 435 million dollars, the company was still “ill-equipped to survive in today’s retail environment”, in the words of Stephen Marotta, its Chief Restructuring Officer.
Payless ShoeSource wasn’t the only American company filing for bankruptcy for the second time in two years. Gymboree Group Inc., the parent company of childrenswear brands Gymboree, Crazy 8 and Janie and Jack, filed for Chapter 11 of the Bankruptcy Code in January, saying it would close about 800 Gymboree and Crazy 8 Stores in the US and Canada and seek a buyer for the Janie and Jack business and the Gymboree online platform. Their plans came to fruition came to fruition two months later, when The Children’s Place, a kidswear retailer with nearly 1,000 stores across North America, snatched the Gymboree and Crazy 8 brands. As for Janie and Jack, Gap acquired the brand for 35 million dollars. The Gymboree Group first filed for bankruptcy in 2017, closing about 350 of its 1281 stores.
Photos: courtesy of Victoria’s Secret, Topshop Facebook, Burberry website, Abercrombie & Fitch media gallery, Roberto Cavalli Facebook