Charming Charlie has filed for Chapter 11 bankruptcy, preparing to close approximately 100 underperforming stores by the end of 2017 as part of its “Back-to-Basics” turnaround strategy. The retailer’s 270 remaining stores and web site will operate as usual throughout the holiday season.
As part of the “Back-to-Basics” strategy, Charming Charlie will close its Los Angeles office and reduce headcount in the Houston corporate support center and distribution center. These changes are designed to allow the retailer to simplify business operations and improve liquidity.
In a court filing, Senior VP and CFO Robert Adameksaid that high cash-on-delivery demands from suppliers prevented the retailer from securing appropriate inventory for the 2017 holiday season. This effectively forced the retailer to file for bankruptcy during the season, instead of waiting to take advantage of peak revenue.
Revenues at Charming Charlie have dropped more than 22%, while operating income plummeted 75% in the last several fiscal years, Adamek noted in the filing.
The fashion and accessories retailer has secured $20 million in debtor-in-possession (DIP) financing from its lenders, as well a separate $35 million asset-backed loan. The loans are intended to ensure Charming Charlie can continue meeting its financial obligations throughout the Chapter 11 case.
The bankruptcy filing isn’t much of a surprise, especially with credit rating agencies Fitch Ratings and Moody’s both listing Charming Charlie as a retailer at high risk of defaulting in 2017. The company joins a host of other specialty retailers that have filed for bankruptcy in 2017, including True Religion, Wet Seal, Payless ShoeSource, Rue21 and Gymboree.