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Teen clothing retailer rue21 plans to close all its stores and sell its intellectual property after having filed for bankruptcy a third time.
The Warrendale, Pennsylvania-based retailer, which at one time had 1,000 brick-and-mortar stores, previously sought Chapter 11 bankruptcy protection in 2003 and 2017, and had closed hundreds of locations.
This time, rue21 plans to shutter its roughly 540 primarily mall-based stores in the next four to six weeks, aiming to wrap up the process by May 31, according to court documents filed Thursday by the retailer in U.S. Bankruptcy Court for the District of Delaware. Boston-based Gordon Brothers will handle the store closing sales.
According to the company's website, it has 31 stores in North Carolina including one in Raleigh at the Triangle Town Center. It also lists a location in Garner at East Park Plaza.
The retailer, which also has an e-commerce operations, is separately seeking to sell its intellectual property. The company's main website was down yesterday after the bankruptcy filing.
Rue21 has nearly a dozen stores across the greater Charlotte region. That includes locations in Matthews, Pineville, Gastonia, Rock Hill, Monroe, Concord, Salisbury and Statesville.
The company listed 33 equity interest holders, the largest being New York-based lender Blue Torch Finance LLC, holding 78.61 percent of its stock. St. Louis-based Stifel Nicolaus & Co. Inc. was listed among holders of less than 1 percent of rue21's stock.
In its filing, rue21 reported estimated assets and liabilities, each, at between $100 million and $500 million.
Rue21 owes nearly $32.6 million combined to its 30 largest unsecured creditors, according to the filing. Its biggest unsecured debt is more than $4.4 million owed to California-based clothing company Hybrid Promotions LLC, which does business as Hybrid Apparel.
Michele Pascoe, who joined rue21 as its CFO in 2018, stepped in this month as interim CEO succeeding Josh Burris.
"Over the past several years, the Debtors’ business operations, like those of many of their peers in the retail space, have been negatively impacted by challenges stemming from the Covid-19 pandemic and related adverse market trends, including a shift in consumer shopping patterns from traditional brick-and-mortar retailers to online retailers and changing consumer preferences," Pascoe said in an affidavit filed with the bankruptcy. "More specifically, the Debtors have recently experienced operational losses resulting from, among other things, underperforming retail locations, increased industry competition and the uptick in online shopping, inflation and macroeconomic headwinds, and challenges raising capital."
The company had explored restructuring alternatives and even solicited bids for the company before filing for bankruptcy, Pascoe said.
"... It became apparent that proposals to purchase the Debtors’ assets at a going concern value would not exceed the projected proceeds that could be realized by liquidating the Debtors’ store-level inventory and assets, closing down their brick-and-mortar retail locations, and winding down operations," she said.
Pascoe said in the affidavit that rue21 plans to ask the bankruptcy court's approval to seek a buyer for the company's intellectual property and other intangible assets.
Riveron Consulting LLC of New York is rue21's restructuring adviser. New York City-based law firm Willkie Farr & Gallagher LLP is acting as the retailer's general bankruptcy counsel, with Young Conaway Stargatt & Taylor LLP of Wilmington, Delaware, acting as its in-state bankruptcy counsel.
The clothing retailer was founded in 1970 as Pennsylvania Fashions Inc., which changed its name to rue21 after emerging from Chapter 11 bankruptcy in 2003. Rue21's initial public offering took the company public in 2009, and its majority owners again took it private in 2013, the year it opened its 1,000th store, according to court documents. Faced with increased competition and customers' shifting preferences away from brick-and-mortar stores, rue21 again filed bankruptcy in 2017, emerging after closing 400 stores and reducing its debt by $700 million.