Retailer Rue21 seeks consultants for potential reorganization, reports Wall Street Journal
In the dynamic world of retail, one name that has been making headlines recently is Rue21. The fast-growing teen retailer of the early 2000s, which once thrived in malls across the US, is now grappling with financial difficulties.
According to data from CreditRiskMonitor, the number of companies at risk of bankruptcy, including Rue21, has significantly increased compared to last year. This trend is not unique to Rue21, as several apparel retailers have reported falling sales and profits in the current environment.
The retail and apparel markets have gone through several shifts since late 2020. Consumers have been pulling back on discretionary spending as they hedge against inflation on essential goods. This shift in demand and sales has exposed or created new financial weaknesses for some in the industry.
Rue21, which emerged from bankruptcy in 2017 after closing over 400 stores, is one such example. The company, which was part of a large cohort of mall-based retailers to go bankrupt in 2017, is now in talks to raise financing to avoid a Chapter 11 filing.
In late 2020, Rue21 announced expansion of its store footprint and was beating its own expectations, increasing its comparable sales year over year. However, the company has since faced challenges. It has hired the advising firm Ducera Partners for potential restructuring, and its ownership was turned over to its lenders after emerging from bankruptcy.
The current members of the Rue21 supervisory board are not publicly disclosed. Despite these challenges, Rue21 is trying to avoid a Chapter 11 filing and has been able to retire debt while increasing availability under its asset-based facility in late 2020.
The risks in apparel, department stores, and specialty retail have increased in recent months, according to data from S&P Global Market Intelligence. This trend, combined with the ongoing challenges faced by Rue21, underscores the difficult landscape that retailers are navigating in the current economic climate.
As the retail industry continues to evolve, it will be interesting to see how Rue21 and other companies adapt to these changes and overcome the challenges they face.
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