Amsterdam-based men’s and women’s lifestyle brand Scotch & Soda has filed for bankruptcy in its home country of the Netherlands, citing “severe cash flow issues” caused by the domino effect of the pandemic, war in Ukraine and inflation were the the financial troubles.
Managing director Frederick Lukoff has stepped down, effective immediately, a spokesperson for the brand confirmed to WWD.
“Despite record sales, a structural cash flow deficit has led to the company’s failure to absorb the negative effects of [COVID-19] and high inflation,” Scotch & Soda said in a statement. Its 32 stores in the Netherlands will remain open “for the foreseeable future,” while the brand searches for a buyer.
The bankruptcy does not affect the entities outside of the Netherlands.
Lukoff is “fully cooperating” with attorney Jasper Berkenbosh, who has been appointed to replace Scotch & Soda’s board in the management of the bankruptcy in the Netherlands, the spokesperson said. He had joined the company in 2019 after a decade as president at Stella McCartney.
The company earned record revenues of 342.5 million euros in financial results reported for the 2022 fiscal year, but said that the previous two years of pandemic restrictions “affected its business performance and financial health negatively.”
Store closures in the Netherlands over the holiday period of December 2021 and January 2022 were “particularly damaging,” causing a direct loss of 20 million euros, it said.
This period, followed immediately by the Russian invasion of Ukraine and the subsequent energy crisis and resulting inflation, all proved to be additional obstacles to its financial health.
Scotch & Soda said it has been struggling since last June, and private equity investor Sun European Partners, which took a stake in the label in 2011, was no longer willing to prop up the company with additional cash.
After months of seeking additional financing, the company brought on consultants Teneo earlier this year to find a buyer.
“Unfortunately, the current shareholder and lenders of the company were unable to help it any further and time was too short to complete the sale of the company as a financially solvent entity to a new shareholder,” the company said.
Boca Raton-based parent company Sun Capital Partners did not respond to requests for comment.
In December, the company announced a licensing agreement with Bos Group to take over its footwear design, production and distribution.
Outside of the Netherlands, Scotch & Soda has been expanding rapidly, opening 36 new stores around the world in 2022, including flagships in Milan and London, and in the mid-sized U.S. markets of Washington, D.C.; Detroit, Mich.; San Antonio, Texas, and Scottsdale, Ariz. The openings brought its North American total to 50, with 46 stores in the U.S. and four in Canada.
The brand opened its first store in China in December 2021 and rolled out four additional stores, including Beijing and Shanghai, in 2022.
Scotch & Soda operates 252 stores around the world across and is carried in 7,000 retailers worldwide.