Cornerstone Apparel is the latest teen retailer to file for Chapter 11 bankruptcy court protection.
The value player does business under the name Papaya Clothing, and operates out of a 75,000-square-foot complex in Los Angeles that includes a warehouse and distribution center. The company made its filing Wednesday in a Los Angeles federal bankruptcy court.
The petition lists estimated assets at between $1 million and $10 million. Liabilities were estimated at between $10 million and $50 million.
Cornerstone’s chief executive officer is Kenneth Choi. Most of the debtors listed in the top 20 list of unsecured claims were trade claims, such as suppliers or manufacturers, although there were a few landlords holding claims for unpaid rent.
A court document filed by Tae Yi, president, secretary and chief financial officer, notes the company operates a chain of apparel stores “targeting teen, juniors and the ‘young at heart,’” or those between ages 16 and 25. The store count on the date of filing totaled 80, mostly located in U.S. malls and shopping centers. It has about 1,300 employees and in 2016, generated annual revenues of more than $134 million. There is no secured debt, according to a court filing.
Yi said in the document that the company established a production line that can “take a new design from start to finish within a two-week period,” comparable to some of the fast-fashion players. But apparently even operating like a fast-fashion firm couldn’t save the company from a bankruptcy filing.
Yi attributed the financial problems to the 50 new retail stores that were opened in the last six years, which he told the court “took a heavy financial toll on the business operations” from construction and other start-up costs, as well as other retail operating expenses. He said the company, in the wake of decreasing store sales, had closed some stores, leaving the 80 in operation, but now needs time to “evaluate the viability of the remaining stores and identify other ways to decrease operational costs and increase profitability.”
While many stores are located in California, Florida and Texas, there were others located in Maryland, New Jersey, New York, North Carolina and Virginia.
Yi said he believes the company is able to formulate a restructuring plan that can be confirmed by the court so the company can exit bankruptcy proceedings.