Popular retail chain closing all stores in Chapter 11 bankruptcy

The chain has begun its liquidation sales and will soon close all of its locations.

May 26, 2024 - 22:30

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Popular retail chain closing all stores in Chapter 11 bankruptcy

Sometimes, the end of a retail chain comes abruptly. That's not normally the case as, in most cases, retailers sort of sputter to their death.

Usually, customers start seeing the store have a limited selection, take longer to restock, and offer random sales. The end for chains like Bed Bath & Beyond and Christmas Tree Shops usually comes after a lot of very public financial maneuvering.

Vendor payments falling behind are often the first sign of financial troubles, and that can set off what becomes a slow painful death. Once your vendors no longer trust you, they either ask for cash upfront and/or stop shipping merchandise.

A chain with empty shelves can't dig its way out of financial trouble and that often leads to a Chapter 11 bankruptcy filing. It's usually a prolonged process that involves banks, vendors, and the bankruptcy court.

Survival is possible in many cases because while the vendors want to get paid, they're also not looking for a big customer to go away because there's no guarantee that another player will step up and replace that sales volume. It's possible to survive a Chapter 11 bankruptcy filing.

David's Bridal and Party City both filed for Chapter 11 bankruptcy and found financial partners willing to help them exit the process and return to normal operations. Rue21 has actually survived two Chapter 11 bankruptcy filings, but it will not survive its third.

rue21 has filed for Chapter 11 bankruptcy for the third time.
Image source: Shutterstock

Rue21 sees a change in fortunes

During the Covid pandemic, when many retailers were shrinking their store bases, Rue21 actually expanded.

“Over the next three weeks we’ll open five stores before students head back to classrooms, and a total of 15 by the end of the year,” former CEO Bill Brand said in 2021. “And next year, we’re going to open at least 20, and about half of those are already committed."

It was a really hopeful time for the women's fashion chain which had previously closed about 400 locations.

“Rue21’s marriage of data and customer recognition provides the perfect formula for a winning location,” added Michele Pascoe, Rue21’s then-CFO. “The success of the new stores in 2020 fueled investment in the 15 new stores this year.”

That success was short-lived as the chain quickly fell back into financial problems. Its Chapter 11 bankruptcy filing was not unexpected, but its decision to close all its stores was.

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In most cases, a Chapter 11 bankruptcy filing gives a company a chance to reorganize its finances and attempt to survive, In this case, Rue21 has already begun the process of liquidating its 540 stores and they will soon close permanently (the final closing dates may vary based on inventory).

Rue21 has begun liquidating its stores

Rue21 has already shut down its website. If you visit the page, it shows a list of stores, but clicking on any links takes you to an error page. The chain still has a working LinkedIn page that describes its operations.

"At Rue21, we believe fashion should be fun and accessible to all. As a leading specialty retailer, we’re different, we’re unique—just like you. rue21 combines a shopping experience designed to fit the individuality of our customers with a community to foster love, advocate change, and empower each other through what we wear and what we do," it shared.

In its bankruptcy filing the chain reported both assets and debts in the range of $100 and $500 million.

The Chapter 11 filing shared that the company "recently suffered operational losses stemming from, among other things, underperforming retail locations, the continued growth of online shopping and industry competition, inflation and macroeconomic headwinds, and difficulties raising capital in an amount sufficient to meet their liquidity needs and fund operations.”

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Rue21, according to the filing, had explored sale, but reached the conclusion that a liquidation would bring the best return on its remaining assets. The chain's intellectual property and leases will be sold in a separate sale.