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Bankruptcy in 2014: Who Filed and Who Won’t See 2015

It was a banner year for bankruptcy as many retailers filed in the face of lower shopper traffic in stores, the ease of e-commerce and an increasingly mobile consumer, and an oversaturated market.

Some brands failed, are in the process of failing, or are projecting failure in 2015. Here’s a look at the year’s struggling retailers.

 

Wet Seal

Wet Seal may be the latest teen retailer on the brink of bust. The retail chain said in December that it may file for Chapter 11 bankruptcy protection if it cannot immediately address its liquidity concerns.

The retailer’s third quarter losses doubled to roughly $36 million, or $0.43 per share. Wet Seal has enlisted the aid of investment bank Houlihan and Lokey and FTI Consulting to advise options for moving forward, including a possible bankruptcy filing.

“A key priority is to address our immediate liquidity needs in the very near term in order for us to have the time and resources to be able to implement our operating strategies,” Wet Seal CEO Ed Thomas said in a statement.

Delia’s

Delia’s, a retail company primarily marketing to teenage girls, announced in early December that it will have to file for Chapter 11 bankruptcy protection in the “very near term” and that it will seek the bankruptcy court’s consent to close existing stores and distribution centers.

The teen retailer was the second to file for bankruptcy within a week as Deb Shops announced its filing just days before.

Delia’s reported a loss in each of its last five fiscal years, with a decline in mall traffic and sparse website orders. In the company’s most recent financial statement for the fiscal second quarter, total revenues were down 22.4% to $25.7 million, and comparable sales, including comp store sales and direct-to-consumer sales, dipped 17.5%.

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The company has been running low on cash and reported in September that it was collecting numerous inquiries about a takeover, merger, or debt or equity financing, but those efforts proved unsuccessful.

Deb Shops

Deb Shops, the teen and plus size specialty retailer, filed its second bankruptcy in less than four years in early December, citing outdated stores and increased competition in the juniors’ and young women’s market as cause for its demise. Declining mall traffic also had negative effects on the mall-based retailer.

The company’s assets are estimated to be worth $90.5 million—half of which is inventory. Court documents report that its liabilities are approximately $120.1 million. The majority of the debt stems from Deb Shops’ deal to get out of its first bankruptcy, which was filed in 2011 when it was under ownership of Lee Equity Partners.

Deb Shops’ investors include Cerberus Capital Management, which owns about 70 percent of the operations, as well as Guggenheim Partners, Credit Suisse Securities USA LLC and Lee Equity Partners. The retailer’s company board has agreed to liquidate the chain, which operates 295 stores, if it cannot find a buyer.

Mexx

Struggling Dutch fashion chain Mexx has gone bankrupt, but its stores will still be open in hopes of selling off stock and attracting a buyer. Also in early December, an Amsterdam judge declared Mexx bankrupt and court appointed trustee Frits Kemp blamed poor economic conditions for the brand’s present position.

The company closed its flagship store in Amsterdam last year and shuttered its website despite growing demand for e-commerce.

Mexx has outlets in 50 countries, including 315 in Europe, and a workforce of 1,500 who will have to wait out the bankruptcy period to see if a buyer bites. The company is currently owned by U.S.–based private equity firm The Gores Group. The brand was formerly owned by Liz Claiborne, but as part of a restructuring, Liz Claiborne sold the brand in 2011, though it retains a minority interest in the stores.

Silver Jeans Stores

SJC Inc., which operates Silver Jeans Stores, filed for Chapter 11 bankruptcy protection in July, claiming that the stores have been suffering from the slow economy in the U.S. and fierce competition with other denim labels like Lucky Brand and True Religion.

The company had planned to liquidate inventory and close five of its six Silver Jeans stores located across California, Texas and Illinois, with its store in the Mall of America in Bloomington, Minn. remaining open because it was sold to an affiliate. The bankruptcy is still pending approval.

The Silver Jeans brand itself is unaffected by the bankruptcy and will continue to be sold at retailers like Macy’s, Dillard’s, Buckle and Maurices.

Alco Stores

Discount chain Alco Stores filed for Chapter 11 in October and planned to liquidate or sell its business.

The company operated 198 discount general merchandise stores in 23 states, and employed roughly 3,000 people. The U.S. Bankruptcy court in November approved and order by the company’s creditors to shutter the stores.

Love Culture

Specialty retailer Love Culture Inc., a privately held 82-store national chain and e-commerce merchant based in Los Angeles, California, filed for Chapter 11 bankruptcy in Newark, N.J. in July.

In a petition filed with the U.S. bankruptcy court in Newark, Love Culture claimed that sales remain below projections, and that vendors had begun curbing credit and demanding payment for goods earlier than before, leading to “significant liquidity challenges.”

Love Culture said it plans to close underperforming stores, to restructure debt, and to investigate options “including a possible sale of substantially all of its assets as a going concern,” noting that “several financial and strategic buyers” have expressed interest in the company, and a number have submitted letters of intent.

According to reports, beginning two years ago, a surge in expenses due to rapid store expansion and the need to upgrade technology and expand online began to challenge profitability. Slower payments to vendors due to liquidity problems disrupted merchandise deliveries to stores, which served to further slow sales.

Coldwater Creek

Women’s clothing retailer Coldwater Creek filed for Chapter 11 protection after struggling with a high debt load and declining sales in an already challenging retail market.

The company, known for both its women’s catalog business and retail stores, had been trying to regain its footing for months, battling against accelerating negative comparable store sales.

In October 2013, the retailer said it would explore strategic alternatives to enhance shareholder value, including the consideration of potential partnerships, joint ventures or a possible sale or merger, but did not set a timeline for the process. Attempts to skirt bankruptcy by refinancing debt or sell itself to a private-equity buyer have been unsuccessful.

Coldwater Creek auctioned its store leases in July, and J. Jill, Forever 21 and Lane Bryant were reportedly among the winning bidders.

Loehmann’s

Loehmann’s the designer discounter that filed for bankruptcy in December 2013 and sold all of its assets said early this December that it has plans to relaunch as an e-tailer.

The company announced that Tony D’Annibale, president of Jessica’s Brands, will be joining the Loehmann’s Advisory Board while the company builds its online marketplace, Loehmanns.com. D’Annibale has a vast amount of knowledge and experience in retailing and in the off-price merchandising category, and will work with the management team during its e-commerce relaunch.

Last year’s bankruptcy filing was Loehmann’s third since 1999. With the help of D’Annibale and its new ownership, the company is hoping to expand online and regain its presence.