CLOTHESTIME, SYCAMORE IN CHAPTER 11 FILINGS
NEW YORK — The retail Chapter 11 virus continues to spread.
On Friday, it hit the women’s off-price community, as The Clothestime Inc., based in Anaheim, Calif., said it had filed a Chapter 11 petition to reorganize. Meanwhile, Sycamore Stores, a 126-unit women’s specialty chain based in Indianapolis, said it had gone into Chapter 11 and would liquidate its assets.
Clothestime said it had received a commitment from the CIT Group/Business Credit Inc. for as much as $40 million in debtor-in-possession financing.
Citing the difficult retail climate, John Ortega 2nd, chairman and chief executive officer of Clothestime, said in a statement that a Chapter 11 restructuring was the only way the retailer could complete a “major reorganization” of the company’s operations.
“Marginal locations won’t survive. By taking this action, we intend to be a survivor,” Ortega said.
Plans includes closing approximately 140 unprofitable or underperforming stores. The company currently operates 537 stores, primarily in strip centers.
Clothestime lost $7.1 million in the nine months ended Oct. 28. Sales slumped 6.6 percent to $240.4 million from $257.4 million, while same-store sales declined 7 percent. In 1994, it lost $11.2 million on sales of $342.3 million.
Ortega said vendor-partnership relationships will be further refined, merchandising and marketing strategies will be realigned and staffing levels, merchandise and facilities performances will be reviewed. Customers and employees “should not notice any difference in ongoing operations” and stores will be open as usual, Ortega said. In addition, with the DIP financing along with cash on hand and revenue from ongoing operations, Clothestime “will have adequate liquidity to purchase goods and services we need.”
Sycamore stores, located primarily in strip shopping centers in Indiana, Ohio, Illinois, Kentucky and Michigan, sell moderately priced women’s apparel. The chain’s annual volume is estimated at $50 million.
According to a Sycamore official, the chain notified its 700 employees of the liquidation on Friday, and going-out-business sales are expected to run until after Christmas.
In a statement, Sycamore said that over the last eight months its management has explored various options, including selling the company, merging and significantly downsizing the business. It “determined it was in the best interest of the creditors to seek protection and initiate an orderly liquidation,” the statement said.
The statement explained that the action had been taken “in light of the extraordinarily difficult women’s retail apparel environment and the limited prospects for its improvement. The company’s lending institution and its investors, wary of the future retail landscape, indicated that additional investment funds are required.” However, Sycamore said, its investor, Vista Group, “has no new funds to invest.”
— Fairchild News Service