Famous Teen Fashion Retailer Files for Bankruptcy

Bankruptcy

Rue21 Files for Bankruptcy Protection, Closes 400 Stores

Pennsylvania-based teen fashion specialty retailer Rue21 has filed for Chapter 11 bankruptcy after facing deteriorating sales and difficulties in servicing its debt. Following the bankruptcy, the company is closing 400 of its stores, with a warning that more store closings might follow.

Prior to the bankruptcy, the company owned 1,179 stores across 48 states in the United States.

The restructuring efforts that led the company to shutter its underperforming stores will result in more layoffs from its workforce.

Rue21 primarily owes its business woes to cheaper online retailers. The company notes that its average customer has an annual income hovering over $35,000. These customers are now increasingly migrating to more affordable online shopping.

At the same time, the company has also suffered at the hands of the more popular teen retailers Forever21 and H&M. Rue21’s biggest customer segment is teenage girls, whose tastes have started trending toward the company’s competitors in recent years. Rue21 has also missed out on having a large online customer base, due to not having a robust web site comparable to those of its peers.

The fashion apparel and accessories company first opened its doors almost 40 years ago. It went public for the first time in 2009. But, only four years later, management decided to once again take Rue21 private. In the process, the company racked up millions of dollars of debt.

Since then, the company has been struggling to pay off its obligations as its tumbling revenue keeps falling short of management’s targets.

To help turn around the company, Rue21’s board made an unexpected move last year by removing its old CEO, who had served at the company’s helm for 15 years. In his place, the company appointed CFO Keith McDonough as interim CEO last October.

Prior to McDonough’s appointment, the company owned more than 1,200 stores countrywide, which have now been cut to just under 800 stores within fewer than eight months.

The company is now negotiating with its creditors in hopes of reducing its debt.

Rue21’s bankruptcy is one of more than a dozen bankruptcies in retail this year, as the U.S. retail sector continues to face serious economic headwinds.

Source:

Teen Retailer Rue21 Files for Chapter 11 Bankruptcy,” The Wall Street Journal, May 16, 2017.

Categories: Bankruptcies, Job Cuts, News
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