According to court papers filed by Furla (U.S.A.) Inc.’s CEO Elena Moncigoli, the Covid-19 pandemic greatly impacted sales in 2020 and weighed on the decision to file for bankruptcy court protection. The brand’s Italian parent, Furla, based in Bologna, Italy, is not a party to the filing. The Chapter 11 petition was filed in a federal bankruptcy court in Manhattan.
“For the first three quarters of 2019, Furla USA generated approximately $27,521,369 in net sales. For the comparable period in 2020, net sales were approximately $9,218,189. This precipitous pandemic-related decline represents a 66.5% loss in revenue year-over-year,” Moncigoli said.
The U.S. business leases six full price stores and eight outlet locations in seven states, generating 2019 net sales of about $22 million, or 58 percent of the year’s total net sales for Furla USA. Wholesale sales brought in net sales of $13 million, or 35 percent of total net sales last year. E-commerce sales in 2019 generated $2.8 million, or 7 percent of total net sales a year ago.
The U.S. arm has no secured debt, managing cash flow needs using profits to pay for ordinary course obligations. When necessary, the parent company, based in Bologna, Italy, would support “Furla USA via a transfer price adjustment, a tax-centric mechanism that is a common feature in the relationship between US domestic entities that have a foreign parent,” Moncigoli told the court in a declaratory statement filed on Friday. At the time of the Chapter 11 filing, Moncigoli said Furla USA has 80 trade creditors and landlords owed about $2 million in unsecured trade debt and lease-related debt.
The Chapter 11 petition listed estimated assets of between $10 million to $50 million. Moncigoli said liabilities were $2 million.
Furla’s top 10 unsecured creditors are store landlords. Simon Property is attached to six of those locations: Copley Place Associates in Boston, Mass., owed $190,422.72; Premium Outlet Partners, Woodbury Outlet in Central Valley, N.Y., $170,403.46 owed; Premium Outlet Partners, Hawaii Waikele Outlet in Waipahu, Haw., $168,400.25; Aventura Mall Venture in Aventura, Fla., $161,795.41; Simon/Chelsea Las Vegas Development in Las Vegas, Nev., $147,309.83, and Premium Outlet Partners, Cabazon Outlet in Cabazon, Calif., $131,580.28. Another listing is The Retail Property Trust, owed $153,096.23, whose parent company is Simon. Also on the list of landlords holding unsecured claims is the Segerstrom family, which owns South Coast Plaza in Costa Mesa, Calif., owed $160,006.68.
A separate court document indicates plans to reject leases at four locations: Aventura Mall in the Miami area of Aventura, Fla., Boston Copley Place in Boston, Mass., Houston Outlet in Cypress, Tex., and Roosevelt Field Mall, on Long Island in N.Y. All four are operated by Simon Property Group.
Moncigoli said that traffic to Furla stores has “significantly declined” in recent years. While locations in Hawaii and at Woodbury Commons have been successful due to large tourist traffic, other locations at Roosevelt Field in New York’s Long Island and Copley in Boston rely largely on domestic foot traffic, which she said has seen a steep decline. The company began reducing operating and overhead costs last year, transitioning operations to focus more on e-commerce and wholesale. All 14 company-run locations were temporarily closed during the pandemic’s outbreak in March, as were the wholesale accounts.
“Because debtor’s goods are luxury products, they generally are seen as discretionary purchases, and consumer discretionary purchases have decreased due to sudden economic decline post-Covid-19,” Moncigoli said.
She said the company has received rent deferrals of rent or forbearance of monthly payments from certain of its landlords, and has furloughed 90 employees. Moncigoli also noted that many of Furla’s primary liabilities arise from its retail store leases, many of which were signed 10 years ago, adding that some “locations are not and will be be profitable at any time.”
The company plans to keep an East Coast flagship store in Manhattan, and other full-price stores in the U.S. market to maintain brand image, as well as maintain some outlet presence and continue its e-commerce site, Moncigoli said.