Designer discounter Loehmann’s Holdings Inc. filed for Chapter 11 bankruptcy yesterday and has plans to sell its assets to liquidators.
This is the Bronx, New York-based retailer’s third time filing for bankruptcy protection since 1999, but with continuously stiff competition from off-price retailers like Ross Stores Inc. and TJX Cos, it might be the last.
Loehmann’s is the last designer brand discounter standing after Filene’s Basement, Syms and Daffy’s closed doors or went out of business over the past four years.
The retailer is currently owned and operated by hedge fund Whippoorwill Associates with Istithmar Retail Holdings owning a minority stake. Loehmann’s put itself up for sale last month but saw no meaningful bids from the thirty-nine buyers who had access to its books, according to filings in the U.S. Bankruptcy Court in Manhattan. So the next step for Loehmann’s is to go with “a wind-down and liquidation process” and aim to sell its assets at an auction December 30, Reuters reported.
Loehmann’s Chairman Michael Appel explained the reason the company was forced to file saying, “increased competition in the off-price retail channel, coupled with limited access to capital, has severely impacted the company’s financial position.”
The discount shopping mecca was founded in 1921 and today operates thirty-nine stores in eleven states plus online offerings. After its first bankruptcy struggle, the company was able to bounce back until filing again in 2011. Reorganization with Istithmar’s help saved the clothier from its second call for financial aid, but amid the sluggish economy and increased competition it has since been unable to get above water.
Speaking to Reuters in a phone interview, Howard Davidowitz, a retail consultant at Davidowitz & Associates in Manhattan said, “The message is that everyone of this size in the off-price business did not have the critical mass to compete,” adding that, “The basis of their existence is to compare themselves to regular stores,” he continued. “But if regular stores are selling products at the same or lower prices, they’re done. We are in the most promotional holiday season in 20 years. That’s what Loehmann’s ran into, and that’s why they filed now.”