BCBG Max Azria is the latest in a long line of fashion and apparel retailers to file for Chapter 11 bankruptcy — providing another warning sign that more retailers could follow.
The chain has begun closing 120 stores as part of its restructuring, the company’s Chief Restructuring Officer Holly Felder Etlin said in court papers filed in Manhattan federal court on Feb. 28. BCBG has obtained a commitment of $45 million in new debtor-in-possession (DIP) financing to “ensure normal operations” during the Chapter 11 process. The company expects to complete its reorganization within six months.
BCBG Max Azria listed assets in the $100 million to $500 million range and liabilities of $500 million to $1 billion, so the brand has plenty of debt commitments it must find a way to pay off.
Appliances and electronics retailer hhgregg also is reportedly preparing to file for bankruptcy this month after confirming that it would explore strategic alternatives to return to profitability. The retailer took a first step in that direction, closing three distribution facilities and 88 underperforming stores (approximately 40% of its footprint) and laying off approximately 1,500 workers.
Fashion And Apparel Struggles Continue
The story of BCBG Max Azria’s decline is becoming all too familiar within retail, particularly in fashion. Women’s fashion retailer Nasty Gal, which had generated $85 million in revenue in 2014, filed for bankruptcy in November 2016 before selling its intellectual property and customer database to UK-based fashion brand Boohoo for $20 million. Nasty Gal will continue to operate as a standalone e-Commerce site as part of the deal, but closed its two brick-and-mortar stores in Los Angeles and now operates under the Boohoo supply chain infrastructure.
The list of bankruptcies now includes brands such as The Limited, American Apparel, Aéropostale, Pac Sun and Wet Seal, who have all had to shutter their operations or restructure via mass store closings. The sporting goods vertical hasn’t fared much better, with Sports Authority and Sport Chalet ceasing operations and Eastern Outfitters filing for bankruptcy in February.
No segment — not even fast fashion — has remained immune. In June 2016, shipping firm EZ Worldwide Express canceled its exclusive contract with Forever 21 due to declining business.
Online shopping and changing consumer shopping patterns that favor convenient fulfillment policies, quick customer service and low, consistent pricing all have played their part in declining sales and thinner margins at these brands. In the case of BCBG, the brand is hoping to win back the customer by building more personalized customer service through its in-store boutiques and online partnerships.
“The steps we are taking now, to address the shift in customer shopping patterns and the growth of online shopping, will allow us to focus on our partner relationships, digital, e-Commerce, selected retail locations, and wholesale and licensing arrangements,” said Marty Staff, Acting Interim Chief Executive of BCBG Max Azria in the statement.