Companies used to wait until after Christmas to either file for bankruptcy or go out of business, but this year, a few are so distressed they just can’t wait.
This story first appeared in the December 8, 2014 issue of WWD. Subscribe Today.
Last week saw two firms — Mexx and Deb Shops — head into bankruptcy proceedings, and one — Delia’s Inc. — said on Friday that it would liquidate and file for Chapter 11 bankruptcy court protection.
Of the three firms, the name that might have the best chance of seeing the light of day again is Dutch fashion firm Mexx.
Los Angeles-based private equity firm The Gores Group acquired its majority stake in the Mexx brand in October 2011 from the former Liz Claiborne Inc. The acquisition price was $85 million, and it acquired the non-controlling interest two years later for $4 million.
On Friday, a judge in Amsterdam named Frits Kemp of Fort Advocaten as Mexx’s bankruptcy attorney. Kemp could not be reached for comment.
The casual apparel brand, which has a wholesale and retail presence across primarily continental Europe, operates about 300 stores. The stores will stay open during the holidays as the company tries to find a buyer.
A spokesman for The Gores Group said, “Mexx was struggling when The Gores Group bought it.” This individual noted that while changes and improvements were made, they were “not enough to overcome the effects of Europe’s long-running double-dip recession — and the recent rapid decline in Eastern Europe.”
The spokesman said “there was no choice but to liquidate the business worldwide.” The private equity firm maintains a lien on the brand, “which it expects to secure the ownership of in the bankruptcy process, and it has several options for maximizing value which it is currently evaluating,” he said.
Mexx’s former chief executive officer, Thomas Grote, resigned in May 2012, and the company has been trying to effect a turnaround over the last few years.
Also on Friday, troubled omnichannel tween retailer Delia’s said it will close all stores after it couldn’t find either a buyer or obtain financing that would allow it to continue operations. It signed an agency agreement with Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC to sell the inventory, as well as store furnishings and fixtures. Delia’s said in June that it was reviewing its strategic alternatives.
Delia’s had tried to sell itself back in 2011, but its 95 stores are in that difficult sector known as the teen market. That retail channel, once known more for the fashion fickleness of teens, is now feeling pressure from consumers with little discretionary income due to lack of jobs. And when they do have dollars to spend, there’s competition from the so-called “fast fashion” chains, not to mention must-have consumer electronic items.
Last week, while Wall Street darlings such as Abercrombie & Fitch, American Eagle Outfitters and Aéropostale all posted third-quarter results that have at least met lowered guidance, commentary from company executives on conference calls to Wall Street indicated that there’s still much work ahead in turning around their fortunes.
Deb Shops, once a hot juniors chain operating under the high-low pricing strategy, filed for Chapter 11 bankruptcy court protection. Dawn Robertson, ceo, said the filing was necessary after its term lenders — Cerberus Capital Management and Guggenheim Partners — declined to make any additional investment in the company. The firm operates 295 stores.
According to Robertson, financial adviser Houlihan Lokey has been trying to find a buyer for the company since last month.
Robertson and others working on the bankruptcy were in Delaware bankruptcy court Friday. Hilco was approved as the “stalking horse bidder” for the going-out-of-business sales. That’s the first step toward an auction — the “stalking horse bidder” sets the procedures and a baseline amount for other offers — that could see either competition from other liquidators for the right to sell the assets of the debtor, or a buyer for the company as a going concern.