On the heels of an array of fashion and retail bankruptcy filings that began to unfold over the course of the year in 2016, New York-based designer Bibhu Mohapatra and retailers The Limited, Wet Seal, and Payless all made headlines when they filed for Chapter 11 protection in early 2017. They were swiftly followed by a handful of additional filings by other retailers, signaling that there is no end in sight to the constant string of fashion and other retail companies struggling financially and looking to bankruptcies courts for protection from their creditors.
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. (Also included below are instances in which brands have entered into administration, an insolvency process in the United Kingdom by which a company is “placed under the control of an insolvency practitioner to enable the insolvency practitioner to achieve objectives laid down by statute.”)
Fashion and Retail-Related Bankruptcies
Here is a look at some of the most recent fashion and retail-related bankruptcy filings …
August 2024 – Avon Products Inc.
Avon Products Inc. filed for bankruptcy in Delaware on August 13 in connection with the more than 300 lawsuits it is facing related to claims that its talc-based products contain cancer-causing asbestos. Avon’s Chief Restructuring Officer Philip Gund confirmed in a filing with the U.S. Bankruptcy Court in Delaware that Avon is currently facing 386 talc-related lawsuits. The bankruptcy is limited to the cosmetics giant’s “non-operational”U.S. holding company, Avon Products; its operating businesses and international operations are not part of the bankruptcy proceedings.
May 2024 – Dion Lee
Dion Lee entered voluntary administration on May 23. “Antony Resnick of insolvency firm dVT Group has been appointed administrator to the Australian arm of the 15-year-old brand, which operates six stores in Australia and one in America,” according to Australian Financial Review, which notes that a full creditors report is being prepared, with a creditors meeting expected to be held in the coming weeks. “We are in the very early stages of our administration process and our focus right now is on speaking with the Australian and US-based team and getting across all the relevant operational and financial data,” Resnick said, noting that “it is too early to comment in any detail on [Dion Lee’s] current financial position other than to say our intention at this time is to operate the brand as a going concern.”
May 2024 – Esprit Europe GmbH
Esprit Europe GmbH and six other German companies of the fashion group are filing for insolvency under self-administration, per Reuters, on the heels of the apparel retailer’s subsidiaries in Belgium and Switzerland filing for bankruptcy in March. Operations for Esprit Europe GmbH and the other German entities will continue “until further notice,” the group said.
May 2024 – Rue21
Rue21 has filed for bankruptcy protection for the third time since 2003, listing assets and liabilities of between $100 million and $500 million each in a Chapter 11 filing with the U.S. Bankruptcy Court in the District of Delaware on May 2. The Warrendale, Pennsylvania-based teen-focused retailer, which is owned by Blue Torch Capital, plans to shut down its 540 stores (following going-out-of business sales that it plans to run over the next 4 to 6 weeks) and sell its intellectual property.
Apr. 2024 – Express Inc.
Express Inc filed for Chapter 11 bankruptcy with the U.S. Bankruptcy Court for the District of Delaware on April 22, citing assets and liabilities in the range of $1 billion to $10 billion. The Columbus, Ohio-headquartered retail chain, which owns Express, Bonobos and UpWest Express, confirmed that it will close almost 100 of its 500-plus Express stores and all of its UpWest stores. Express announced that it has received a non-binding letter of intent from a consortium led by WHP Global, and participants, including a wholly owned indirect subsidiary of Simon Property Group, L. P. and Brookfield Properties, for the potential sale of a substantial majority of the Company’s retail stores and operations. The mall retailer said that it and its subsidiaries have filed voluntary Chapter 11 petitions in order to “facilitate the sale process, Express.”
UPDATED (Jun. 14, 2024): Phoenix Retail, a joint venture between equity investor WHP Global and mall owners Simon Property Group and Brookfield Properties, received approval from a bankruptcy court in Delaware to acquire most of the assets of Express.
Apr. 2024 – Esprit Belgie Retail
Esprit’s Belgium subsidiary, Esprit Belgie Retail, has filed for bankruptcy, citing rising costs and cash flow issues. The fashion retailer, which is listed on the Hong Kong Stock Exchange, filed for the commencement of insolvency proceedings for its subsidiary with a court in Belgium on April 8. “Esprit said its Europe retail business operations were under stress because of high energy and logistics costs and weak consumer sentiment. In late [March], the fashion retailer’s Swiss unit had filed for insolvency,” the Wall Street Journal reported, noting that the retailer is “focusing on a comprehensive reorganization to strengthen the business with wholesale and franchise partners.”
Mar. 2024 – MATCHES
Frasers Group announced that it has put MATCHES into administration in the United Kingdom, not long after it acquired the online fashion platform from Apax Partners in December 2023 for about £52 million ($66.59 million). Mike Ashley-owned Frasers Group said in a statement on March 7 that the more than 30-year-old MATCHES had “consistently missed its business plan targets” and was making “material losses.” Given that “continued funding requirements would be far in excess of amounts that the Group considers to be viable,” Frasers said it had decided to shutter the company and place it into administration, noting that while “MATCHES’ management team has tried to find a way to stabilize the business, it has become clear that too much change would be required to restructure it.”
Feb. 2024 – Re:NewCell AB
Swedish textile recycling company Renewcell has filed for bankruptcy. In a release on February 25, the Stockholm-headquartered pioneer in “textile-to-textile recycling” revealed that it had been negotiating with its two largest shareholders, Swedish fast-fashion giant H&M and materials company Girindus, as well as existing lenders BNP Paribas, European Investment Bank, Finnerva, Nordea and AB Svensk Exportkredit, in order to avoid bankruptcy. However, the company – which garnered headlines thanks to its production of Circulose, a textile pulp made from chemically recycled cotton waste – stated that “it is now clear that these discussions have not resulted in a solution which would provide Renewcell with the necessary liquidity and capital to ensure its operations going forward.”
UPDATED (Jun. 4, 2024): Sweden-based investment firm Altor has acquired the assets of Renewcell, the Swedish cotton textiles recycling company. The terms of the deal have not been disclosed. “This acquisition marks a new chapter for Renewcell, now renamed Circulose,” Renewcell stated on its website. “With Altor’s ownership, there is secure financing for the future of Circulose, ensuring that the company’s pioneering cotton recycling technology continues to thrive on a global scale.”
Feb. 2024 – The Body Shop
The Body Shop collapsed into administration in the United Kingdom on February 13. The administration filing comes almost three months after the cosmetics, skincare and fragrance company company was acquired by German private equity company Aurelius for £207 million. “Aurelius confirmed it had appointed the accounting firm FRP Advisory as the ad
2023
Dec. 2023 – Signa Prime Selection AG
Signa Prime Selection AG is the latest Signa subsidiary to seek bankruptcy protection. The company – which maintains stakes in retailers including Selfridges, KaDeWe, and Karsdadt, and owns properties of the Galeria Karstadt Kaufhof department store chain, among others – has filed for bankruptcy and submitted a restructuring plan with the Vienna Commercial Court on December 28. Rene Benko’s group said that Signa Development Selection AG will file for bankruptcy on December 29, following from similar efforts by the group’s online sporting goods division, Signa Sports United, which filed for insolvency in October and Signa Holding, itself, and several smaller subsidiaries, which announced their insolvency in recent weeks.
The group, which “builds and [leases] properties, leaving the retail operations of the department stores to other businesses,” per Reuters, “has recently been beset by the higher building costs, energy prices, and interest rates that have dogged the entire property sector of late, while the brick-and-mortar retail sector is also struggling, partly against online competition.”
Oct. 2023 – Showfields
Showfields filed for Chapter 11 bankruptcy with U.S. Bankruptcy Court in the Eastern District of New York on October 6. The company, which describes itself as “a lifestyle discovery store,” will be restructuring through the Small Business Reorganization Act, Subchapter V, a form of Chapter 11 bankruptcy devised during the COVID-19 era to help small businesses keep operating, reorganize, and maintain control of their finances without creditors taking over, per WWD. The retailer, which first launched in 2019, indicated in its filing that it has “entered into an agreement with the debt-financing company Pipe Technologies Inc. whereby the debtor sold its accounts receivable and recurring revenues to obtain operating capital for its businesses in the aggregate amount of $1.4 million.”
“As with most commercial enterprises established almost immediately prior to and during the covid-19 pandemic, the Debtor was plagued with lower-than-expected revenue streams from the Non-Debtor Stores due to low Member sales resulting from the national lockdown and gradual reopening of public spaces across the country,” the Tal Nathanel-co-founded and led Showfields further stated in its filing. Nathanel said in a statement that the company will focus on its Brooklyn and Washington locations, and finalize the shuttering of its Miami and Manhattan locations. (Its outpost in Los Angeles is not subject to the bankruptcy filing.) The company will use the new funds to pay outstanding bills and increase marketing and expansion of its Brooklyn store, among other things.
Sept. 2023 – Soft Surroundings
Soft Surroundings filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court for the Southern District of Texas in Houston on September 10, citing up to $50,000 in estimated assets and between $50 million and $100 million in estimated liabilities. The St. Louis-based retailer’s parent company Soft Surroundings Holdings LLC says it will close the womenswear company’s 44 leased stores and sell its online and catalog business to Coldwater Creek as part of the Chapter 11 plan. “Over the past year, we have taken significant steps to fortify our financial standing including rightsizing our business to better match current market conditions,” Bridgit Lombard, Soft Surroundings executive chair, said in a statement. “This will allow us to adapt, restructure and emerge more resilient, ensuring the longevity of the beloved Soft Surroundings brand for our customers and partners.”
Jul. 2023 – Julien Macdonald
The eponymous label of Welsh designer Julien Macdonald initiated liquidation proceedings on July 24, citing economic instability. “The business fell into trouble during the Covid pandemic which affected all aspects of the retail sector. Julien Macdonald lost a significant proportion of revenue following the collapse of Debenhams at the end of 2020,” with cashflow issues being “compounded by general inflationary costs, which impacted on all aspects of the business,” FTS Recovery said in a statement. FTS – which has been appointed as the liquidator for the Julien Macdonald company – further stated that “no employees or existing contracts could be saved.” FTS will sell the 25-year-old, London-based company’s remaining inventory and other assets in order to seek repayment for creditors.
This is a short excerpt from a data set that is published exclusively for TFL Pro+ subscribers. For access to our up-to-date fashion & retail bankruptcies tracker, inquire today about how to sign up for a Professional subscription.
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