The problems of Lucky Brand keep piling up, forcing the denim retail group to file for bankruptcy protection, and blaming the ongoing global health crisis as one of the culprits for its miseries.
Lucky Brand announced it has a deal readied to sell the company, with plans to close down 13 shops and shutter more as the bankruptcy process gets underway. No shutdowns are planned in Massachusetts, where the retailer has several mall branches.
On Friday, Lucky Brands filed for Chapter 11 protection in the federal bankruptcy court in Delaware. In the filing, chief restructuring officer Mark Renzi disclosed a plan to sell the retail chain to buyers led by apparel retail group SPARC for $140 million in cash and $51 million in credit. The offer would preserve much or all of the company's existing network of shops, Lucky stated.
According to Matthew Kaness, interim chief executive officer and executive chairman, the coronavirus pandemic has severely affected the retailer's sales across all channels. "While we are optimistic about the reopening of shops and our customers' return, the business has yet to recover fully," Kelly Tyko of USA Today, quoted Kaness as saying in a statement.
The Los Angeles-headquartered denim group is the latest retailer to succumb to the ill effects of the pandemic, which has greatly affected clothing sales as stores close down for business during the turmoil. Lucky joins Neiman Marcus, J. Crew, and the long-struggling J.C. Penney, all of which sought for bankruptcy protection during the crisis.
Lucky Brand operates over 200 shops in the United States, a big number of which is found in shopping malls, and sells products at other chains including Nordstrom, Costco, and Macy's.
The retail group was also hurt by limited liquidity, which made it very difficult to secure new inventory from sellers. Chief restructuring officer Mark Renzi disclosed that some key vendors started requiring payment upon delivery or other new conditions, adding to the financial burden on the retailer.
Lucky announced early this year that it had around 3,000 workers, the majority of whom work on a part-time basis. After shops shut down due to the coronavirus, the group furloughed almost 2,700 of its employees and has recalled back only about 900.
Lucky Brand is owned by Leonard Green & Partners LP, which owes its lenders around $182 million to and $79 million to vendors, court records showed. As many as 25,000 stores could be closed down in the coming months as sales continue to drop due to the crisis, a recent report from Coresight Research revealed.
