The New York flagship on Fifth Ave. will close by the end of December.

Bankrupt Charming Charlie Holdings Inc. plans to file its Plan of Reorganization within 10 days and exit bankruptcy proceedings in 95 days.

Robert Adamek, senior vice president and chief financial officer, disclosed that timetable in a “declaration” filed with the bankruptcy court.

The company filed its voluntary Chapter 11 petition for bankruptcy court protection Monday in Delaware. The company estimated assets at between $50 million to $100 million, and liabilities of between $100 million to $500 million. The three top unsecured creditors — all trade claims — were: Tycoon Int’l, New York, N.Y., $1,006,547; E.l.f. Cosmetics Inc., Chicago, Ill., $986,886, and Berkshire Fashions Inc., New York, N.Y., $974,541.

According to Adamek’s court document, the company will pursue a debt-for-equity conversion, which also contemplates a new $35 million revolving credit facility and a new $50 million secured term loan. That would help deleverage the business by more than $100 million. The company would also consider a sale of its assets.

Adamek also confirmed the closure of 100 stores. The plan is to keep about 276 go-forward stores, consisting of 132 lifestyle centers, 85 shopping malls, 53 power centers, 2 street stores and 4 outlets. Also on the agenda for closure is its Los Angeles office. The company also plans a reduction in head count at its Houston Corporate Support Center and Distribution Center. It employed about 5,665 employees — 1,065 full timers and 4,600 part timers — at the time it filed it petition.

Founded in 2004 by Charles Chanaratsopon, the company over the years expanded to more than 390 locations across the U.S., Canada, the Middle East and the Philippines, with sales growing to over $400 million. Its primary footprint is centered in California, Florida and Texas. The business’ core consumer is a woman between ages 35 and 55. High-spending consumers on average shop three times a year at $89.43 per visit, and represent 38 percent of its customer base. Low spenders visit twice a year and spend between $30 and $71.64 per visit.

Chanaratsopon and his family still own 70 percent of the interest in the company. Hancock Park Capital holds a 26.5 percent stake, while various individuals and investment firms own the remaining 3.5 percent. Chanaratsopon continues as a board member, but relinquished the chief executive officer role on Oct. 27. He was succeeded by Lana Krauter as interim ceo.

While Adamek said adverse macro-trends hurt the business, he also acknowledged certain missteps that contributed to operational shortfalls, such as merchandising miscalculations. The court document also noted that merchandise is offered in as many as 26 different hues, although that approach also eventually caused the retailer to be saddled with excess merchandise in underperforming color offerings. The most popular category is jewelry, which historically has boosted company-wide margins above 60 percent. Also hurting the company was a failed attempt in 2014 to redefine the brand, which had included the elimination of key styles and product categories.

The chief financial officer said that consolidated net revenue has declined over 22 percent and EBITDA has fallen over 75 percent “over the last several fiscal years.”

Adamek also said the company “has been operating without sufficient liquidity throughout the fall of 2017.” Current cash balances are less than $1 million, and the retailer has only about $1.8 million of availability under its revolving credit facility, according to the court document.

The company’s Back-to-Basics plan to restructure the business provides for the streamlining of its operational model, including working with vendors to shorten the period from product concept to in-store stocking.

load comments
blog comments powered by Disqus