The troubles continue to pile up for beleaguered clothing manufacturer BCBG Max Azria Group, LLC. The upscale women’s clothing chain, which announced earlier in the year that it would shutter many of its brick-and-mortar shops and restructure its business, has hit a snag with its efforts to emerge from Chapter 11 bankruptcy protection.
Back in January, the company said it was looking to close stores and restructure as it copes with debt, a shift of consumer tastes, and online shopping habits. The fashion brand, which was founded in Los Angeles in 1989, had grown to more than 570 stores worldwide, including more than 175 in the U.S. and more than 50 stores in Canada.
After having years of success, the company’s revenues have been in decline over the last number of years, falling more than 20% from $785.0 million in 2014 to $615.0 million in 2016. The company is also saddled with debt and can’t pay its bills. Court documents also suggest the company has debts of up to $1.0 billion and assets of up to $500.0 million.
“Unfortunately, like many other apparel and retail companies, BCBG has fallen victim in recent years to adverse macro-trends, including a general shift away from brick-and-mortar to online retail channels, a shift in consumer demographics,” the company said in a court filing.
Seth Lubove, a spokesman for BCBG, said the company has “too large a physical retail footprint. To remain viable, the company — like so many others in its industry — must realign its business to effectively compete in today’s shopping environment.”
As a result, the company has laid off 123 people at its Vernon, California headquarters, will close 120 stores in the U.S., and liquidate and close all 51 stores in Canada. (Source: “WARN Report,” State of California Employment Development Department, last accessed June 2, 2017.)
Still, the company is looking at a “variety of options” to restructure the business. To that end, in March, BCBG announced it is seeking protection under Chapter 11. During the process, the company received commitment for $45.0 million in new financing to refund its restructuring efforts, which are focused on digital, e-commerce, and licensing agreements.
BCBG expects the restructuring to be completed within six months (by September 30, 2017) and will keep some of its stores open in the process. In addition to closing 120 stores in the U.S. and all 51 stores in Canada, the brand will also consolidate its operations in Japan and Europe.
But BCBG’s restructuring has hit a snag. According to trustee William Harrington, the company’s plan to emerge from bankruptcy needs to be reworked, saying it unjustifiably excludes creditors from the approval process and has overbroad liability releases. BCBG now has to explain why its restructuring plan treats five different classes of creditors as unimpaired parties despite altering their legal rights.
BCBG is just the latest in a string of retailer shuttering stores in 2017. After a disappointing holiday season, Macy’s Inc announced in early January it could gut more than 10,000 jobs as it closes 68 stores and streamlines its remaining locations. That same month, Sears Holdings Corp said it will close an additional 150 locations, including 108 Kmart stores and 42 Sears stores. Clothing retail company The Limited followed suit and announced that it was closing all 250 of its stores nationwide and that it would focus all its attention on the company’s online operations.
“U.S. trustee pans BCBG Max Azria’s disclosures for its Ch. 11 plan,” Reuters, May 24, 2017.
“US Trustee Objects To BCBG Ch. 11 Plan Details,” Law 360, May 26, 2017.
“BCBG to Close Stores, Restructure as Online Shift Takes Toll,” Bloomberg, January 18, 2017.
“In re: BCBG Max Azria Global Holdings, LLC, et al.,” Donlin Recano, last accessed June 2, 2017.