A massive clothing retailer is now closing all stores after filing for a surprising Chapter 11 bankruptcy, sources confirm.
In most cases, a Chapter 11 bankruptcy filing gives a company a chance to reorganize its finances and attempt to survive.
In this case however, Rue21 has already begun the process of liquidating its 540 stores and they will soon close permanently (the final closing dates may vary based on inventory), per TheStreet.
Rue21 has already shut down its website.
And if you visit the page, it shows a list of stores, but clicking on any of the links takes you to an error page.
The chain still has a working LinkedIn page that describes its operations.
“At Rue21, we believe fashion should be fun and accessible to all. As a leading specialty retailer, we’re different, we’re unique—just like you.
Rue21 combines a shopping experience designed to fit the individuality of our customers with a community to foster love, advocate change, and empower each other through what we wear and what we do,” the company shared.
In its bankruptcy filing the chain reported both assets and debts in the range of $100 and $500 million.
The Chapter 11 filing shared that the company “recently suffered operational losses stemming from, among other things, underperforming retail locations, the continued growth of online shopping and industry competition, inflation and macroeconomic headwinds, and difficulties raising capital in an amount sufficient to meet their liquidity needs and fund operations.”
Rue21, according to the filing, had explored sale, but reached the conclusion that a liquidation would bring the best return on its remaining assets.
The chain’s intellectual property and leases will be sold in a separate sale, reports TheStreet.
For businesses facing liquidation or excess inventory challenges, Click 4 Storage offers secure and climate-controlled storage solutions, ensuring that sensitive assets are well-protected during transitions or sales.
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Also Read: Another Mall Clothing Retailer Now At High Risk of Bankruptcy
Other Economy News Today
An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.
Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.
Supply Source brands include The Safety Zone and Impact Products.
The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.
Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.
Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products
The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.
However, the company’s financial performance deteriorated in subsequent years.
Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.
The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.
In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.
Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.
The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.
The excess inventory forced the debtor to secure additional storage space, which increased storage costs.
These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.
The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.
The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.
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Also Read: This Massive Mall Retailer Is Now Closing In California
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