Perfumania Chapter 11 Bankruptcy Plan Includes Recapitalization, Going Private

Another American retailer bites the dust as the retail apocalypse continues. America’s largest specialty retailer of fragrances, Perfumania Holdings, Inc. (NASDAQ:PERF), has announced that it is going private after getting delisted from the stock exchange by NASDAQ. The company had previously announced a recapitalization plan following its Chapter 11 bankruptcy. Perfumania’s reorganization plan has now been confirmed with the company planning to close dozens of its stores and lay off employees.

Perfumania Stock Gets Delisted from NASDAQ, Retailer Going Private

The Bellport, New York-based Perfumania, which is touted to be the largest retailer and distributor of fragrances in the U.S., has had a three-decade-long history of selling fragrances and beauty supplies at its 230 stores across the country. Yet, it couldn’t save itself from the retail apocalypse that is beginning to kill traditional retail.

Perfumania, like most other big American retailers, started losing sales as soon as the e-commerce industry began to encroach upon brick-and-mortar retail. The company eventually got forced to file for Chapter 11 bankruptcy in August and initiated a recapitalization plan to save itself from sinking further.

With sales slipping, debt piling up, and creditors knocking on its doors, Perfumania’s management decided to take the company private. However, before the court could approve Perfumania’s reorganization plan, NASDAQ slapped it with a notification that the company could no longer stay listed on the exchange for having failed to comply with its listing rules.

And so, it has finally been confirmed that Perfumania’s shareholders will be losing part, if not all, of their investments as the management downsizes the company and takes it private.

Perfumania’s Reorganization Plan After Chapter 11 Bankruptcy Gets Court Approval

Perfumania’s reorganization plan has finally received the U.S. bankruptcy court’s approval. Perfumania will be a private company going forward, with a smaller retail footprint and a smaller company-wide workforce.

A company spokesperson has confirmed that Perfumania is closing 65 of its retail stores, to cut the total number down from 230 to 165 stores. In addition, over 195 employees will lose their jobs following the store closures.

Shareholders who submit a shareholder release form will manage to receive a measly $2.00 a share for their stakes.

The company revealed that its stores, most of which are located in malls, have been losing foot traffic as Americans turned to online shopping. Nonetheless, the closures of the underperforming stores will be followed by the company’s increased investment in digital retail channels.

The company said in a statement, “Looking forward, Perfumania will further emphasize and invest in its e-commerce business so as to improve customers’ online shopping experience.”

Biggest Bankruptcies of 2017 as Retail Apocalypse Continues

The reasons cited for Perfumania’s Chapter 11 bankruptcy perfectly match those given by other retailers that went bankrupt this year.

America’s retail industry is facing an unprecedented shift in consumer tastes. More and more Americans are choosing to make their purchases online via their smart devices, instead of walking down to the stores.

The trend is causing an industry-wide ripple effect where one after another big retailer is feeling forced to close stores, lay off employees, or worse, go bankrupt.

In fact, retail bankruptcies have been growing at an alarming rate this year and retail store closures are already on pace to outnumber the Great Recession store closings.

In the past twelve months alone, America has witnessed some of the biggest names in specialty retail going bankrupt. We’ve seen BCBG Max Azria Group, LLC; The Gymboree Corporation (NASDAQ:GYMB); PAYLESS SHOESOURCE, INC.; rue21, inc. (NASDAQ:RUE); Ascena Retail Group Inc (NASDAQ:ASNA), bebe stores, inc.(NASDAQ:BEBE); Wet Seal, LLC.; RadioShack; Gander Mountain Company (OTCMKTS:GMTN); and True Religion Apparel, Inc. (NASDAQ:TRLG) all filing for Chapter 11 bankruptcies after struggling with slumping sales and mounting debt.

It is speculated that even bigger bankruptcies are likely to follow in the coming months, with department stores giant Sears Holdings Corp (NASDAQ:SHLD) possibly taking the lead. It’s no wonder that Amazon.com, Inc. (NASDAQ:AMZN) is largely being blamed for the changing industry dynamics.

Suffice it to say; Perfumania’s Chapter 11 bankruptcy may only be a small drop in the ocean where “Hurricane Amazon” is beginning to wreak havoc.


Sources

Perfumania Holdings, Inc. Plan of Reorganization Confirmed,” NASDAQ, October 06, 2017.

Perfumania Holdings, Inc. Initiates Recapitalization,” Perfumania Holdings, Inc, August 26, 2017.

Perfumania Holdings, Inc. Announces Anticipated Nasdaq Delisting and SEC Deregistration,” Perfumania Holdings, Inc, September 21, 2017.

Perfumania files for Chapter 11, going private,” Long Island Tech News, August 28, 2017.

Categories: Bankruptcies

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