Fung Global Retail & Technology tracks store openings and closures for a select group of US retailers.
What is happening this week?
Rue 21 Files for Bankruptcy
Teen fashion retailer Rue 21 filed for Chapter 11 bankruptcy protection this past week, impacted by the change in consumers’ preference toward online shopping as well as growing competition from fast-fashion retailers. The company has experienced supply-chain challenges and tightening trade terms, prompting the Chapter 11 filing.
We previously reported that Rue 21 planned to close 400 stores, and with the news of the recent bankruptcy filing, more store closures would not come as a surprise. Meanwhile, the retailer stated that it has reached an agreement with key lenders, which will ensure it continues normal operations during the Chapter 11 process, pending court approval. Rue21 expects to emerge from the bankruptcy proceedings in the fall of 2017 with a significantly deleveraged balance sheet.
The bankruptcy of Rue 21 follows a trend in which we are seeing highly-leveraged retailers struggling to adapt to the changing retail environment. While the primary reasons for their decline might be attributed to: 1) declining mall traffic; and 2) changing consumer tastes, highly leveraged balance sheets have crippled the ability of these retailers to transform their businesses effectively.
Macy’s Expanding Backstage Outlets
While Macy’s is continuing with its pledge made in 2016 to close 100 full-line stores by the end of 2017, it is also continuing to expand the presence of its off-price Backstage outlets. The company has plans to add 19 more Backstage stores within existing Macy’s full-line stores this year, citing good performance in its early attempt.