Lord & Taylor and its apparel-subscription parent company Le Tote filed for bankruptcy Sunday.
The nation’s oldest department store, purchased just last year by eight-year-old San Francisco fashion rental startup Le Tote, filed the voluntary Chapter 11 petition in a Richmond, Va., federal bankruptcy court.
Executives at Le Tote could not be immediately reached for comment by press time.
Though not unexpected, Lord & Taylor’s collapse into bankruptcy marks the latest in a long string of retail luminaries unable to withstand the supply-and-demand double whammy inflicted by the coronavirus pandemic. In April, the chain, which employs 651 and carries nearly $140 million in debt, laid off large swathes of workers, from store staff to merchants to executive leaders and even CEO Ruth Hartman.
What’s more, Le Tote also laid off some of its own employees as the weight of the COVID-19 outbreak took its toll, leading to speculation that the two companies were preparing to file for bankruptcy when they were able to reopen stores and clear out inventory, though that has not proven to be the case. Many financial and industry experts believe there’s little need for Lord & Taylor’s 38 brick-and-mortar locations in a virus-wary world that has kept many consumers away from stores and malls. Plus, the department store concept is falling out of favor in a world where direct-to-consumer brands can spring up overnight and offer value without the traditional retail markup.
Founded by CEO Rakesh Tondon and president Brett Northart in 2012, Le Tote acquired Lord & Taylor’s intellectual property, e-commerce site and the rights to operate its existing stores in 2019 from Hudson’s Bay Co. (HBC) for $100 million. The deal, which closed in November, called for the payment of $75 million in cash upon close and a $25 million secured promissory note payable in cash after two years. Tondon has said that the digitally native company was looking for stores to expand into the brick-and-mortar channel, and the 194-year-old department store retailer offered an attractive vehicle for real-world customer acquisition. The plan had been to include Le Tote shop-in-shops in Lord & Taylor stores to introduce customers to the monthly subscription model. Tondon has said the two companies have a similar customer profile.
The filing also has an impact on HBC, even though the Canadian firm is not a party to the bankruptcy filing. In the transaction with Le Tote, HBC took responsibility for rent obligations—totaling roughly $58 million annually—for the stores for the initial three years after the deal closed. The two planned to re-evaluate the store network next year, and the stores that HBC owns remain under its ownership. The deal also gave HBC a 25 percent equity stake in Le Tote, and it placed two of its executives to the rental firm’s board of directors.
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Le Tote has found an audience with younger consumers, who show a preference for the access-oriented value proposition of the monthly apparel subscription model. The company is considered to fairly successful for a fashion startup. According to PitchBook, the company appeared to have been in the process raising about $208 million from later stage venture capitalists, in what would likely be considered a Series D round when the pandemic hit in mid-March.
The two bankruptcy petitions follow an onslaught of filings by J. Crew Group, Neiman Marcus Group, J.C. Penney & Co. Inc., Brooks Brothers and Ascena Retail Group, among others. More recently, Tailored Brands, the owner of suiting specialist Men’s Wearhouse, said it too would likely need to file a Chapter 11 petition sometime in the third quarter, which for retailers began on Aug. 2.