Sportswear company bankruptcy shows pressure on retailers

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Prominent activewear retailer Lorna Jane filed for Chapter 11 bankruptcy protection in the US bankruptcy court in Los Angeles, California on Thursday to terminate its US commercial leases.

It’s a strategy previously used by other retailers amid the Covid-19 pandemic.

The Brisbane, Australia-based company said Covid-19 had “severely restricted” retail sales in the US and suppressed consumer willingness to shop in person.

“The debtor assumes that these changes in consumer purchasing behavior will continue after the pandemic has subsided and will continue to affect stationary retail in the future,” said Richard Munro, the company’s appointed chief restructuring officer.

Second celebrity bankruptcy

Lorna Jane is the second celebrity bust in just a few weeks. Sequential Brands, the owner of Jessica Simpson’s fashion line, filed Filed for bankruptcy in Wilmington, Delaware, United States Bankruptcy Court on August 31.

Sequential brands called The Covid-19 pandemic disrupted management’s efforts to sell the company and resulted in declining sales that caused it to violate financial agreements with lenders.

Net sales decreased from $ 101.6 million in 2019 to $ 89.8 million in 2020.

Sequential Brands and Lorna Jane join other recognized brands that have filed for bankruptcy since the coronavirus pandemic began. Names include J. Crew, True Religion Apparel, Lucky Brand Dungarees, Brooks Brothers, Tuesday Morning, New York & Co., Sur La Table, and Guitar Center.

Lorna Jane

Lorna Jane said the coronavirus pandemic accelerated a decline in sales in her brick and mortar retail boutiques, even though e-commerce sales have increased.

In-store sales decreased 56% in fiscal 2020, while online sales increased 62% and accounted for 47% of total sales.

As a result, Lorna Jane said her rental commitments were “always unsustainable”. Current lease commitments are $ 14.9 million, of which $ 2.1 million is in arrears.

The company tried to negotiate new rental terms, but landlords were reluctant to make long-term adjustments necessary to ensure Lorna Jane’s continued viability. This prompted the company to file for bankruptcy as a “best resource” to “overcome challenges and promote continued success”.

Leasing rejection strategy

Lorna Janes has closed its US retail locations and plans to use bankruptcy to reject leases at all 21 retail locations to change the size of the store.

“It is believed that such efforts will allow the debtor to better adapt in light of the pre-pandemic shift to online shopping as well as the impact of the Covid-19 and Delta Variants pandemic on brick and mortar retail,” said Munro stated.

Lorna Jane was founded in 1989 in Brisbane, Australia by aerobics teacher Lorna Jane Clarkson and her husband Bill Clarkson.

The company tried to capitalize on the yoga and fitness trend introduced by competitors like Lululemon by expanding into the United States.

Lorna Jane opened her first US store in Santa Monica, California in 2012 and until recently had 22 locations in California, Arizona, Texas, Utah and Washington.

Read More: US Retail Sales Slowed 1.1% in July

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