US Fashion Retailer ‘Rue21’ Files Bankruptcy For Third Time To Shut Down All Its Stores- Check Details (image source: www.rue21.com)
US fashion teen apparel retailer brand ‘rue21’ has filed for bankruptcy protection for the third time, signalling its intent to close all 540 stores and sell its intellectual property. This move comes amidst ongoing financial challenges exacerbated by shifts in consumer behavior and the impact of the COVID-19 pandemic, news agency Reuters reported.
rue21 Bankruptcy Filing and Store Closures
rue21’s decision to seek Chapter 11 protection stems from its inability to secure a buyer willing to pay more than the company’s estimated liquidation value. Documents filed in Delaware bankruptcy court reveal rue21’s intention to shutter all stores and conduct “going out of business” sales. This marks the third bankruptcy filing for the Warrendale, Pennsylvania-based retailer, previously seeking protection in 2003 and 2017.
rue21 Business Profile and Debt
Specializing in affordable fashion for teens and young adults, rue21 boasts a workforce of approximately 4,900 employees and carries a debt load of USD 194.4 million. Despite once operating 1,000 stores across U.S. malls, rue21’s footprint has steadily declined, with about 400 stores closed during its 2017 bankruptcy restructuring.
rue21 Continued Struggles and Impact of Online Shopping
Despite debt reduction efforts in its previous bankruptcy, rue21 has grappled with sustained challenges, notably the surge in online shopping catalyzed by the COVID-19 pandemic. The shift in consumer preferences has further eroded the company’s profitability and viability in an increasingly digital retail landscape.
rue21 Capital Infusion and Ownership Changes
In a bid to address operational hurdles, rue21 sought additional capital in 2022 and secured a USD 25 million investment from existing lenders. However, this move resulted in significant ownership changes, with lenders now holding an 80 per cent stake in the company. Despite the capital infusion, rue21’s financial woes persisted, necessitating the current bankruptcy filing.
rue21 plans to divest its brand and intellectual property separately from its store closure proceedings. To facilitate the liquidation process, the company has enlisted Gordon Brothers to manage the store closing sales, signaling its commitment to maximizing value for stakeholders amidst the restructuring efforts.
