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Love Culture Files for Chapter 11 Bankruptcy Protection

When it’s deliver-or-die, supply chains become the lifeblood of a company. To that end, the fashion industry has embraced technology to navigate today’s hyper-complicated supply chain, with myriad solutions shaping the first, middle and last mile. Call it Sourcing 2.0.

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. last week.

The retailer, founded in 2007 by former Forever 21 executives Jai Rhee and Bennett Koo, caters to women in the 18-to-35 age range. It joins a growing list of retailers seeking protection from the courts from creditors that includes Ashley Stewart, Dots, Coldwater Creek and Loehmann’s. It also underscores the very difficult market environment for small- to medium-sized players in the young contemporary market space increasingly dominated by fast-fashion giants H&M and Forever 21, as well as specialty store players who have succeeded in creating brands that have made a strong connection with Millennial consumers like Urban Outfitters’ Anthropologie. Love Culture’s sales for the fiscal year ended January 2014 are an estimated $162 million.

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.

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