BIG NEWS: Luxury apparel brand files for Chapter 11 bankruptcy
The luxury fashion retail industry has grappled with numerous challenges this year, including inflation, rising interest rates, and the lingering effects of the Covid-19 pandemic.
Additional Challenges for Luxury Fashion Retailers
In addition to these obstacles, luxury retailers have faced industry-specific issues, such as keeping brick-and-mortar stores relevant and combatting shrinkage, commonly known as retail theft.
Ted Baker Canada and Anne Fontaine USA File for Bankruptcy
The luxury fashion segment experienced a significant blow earlier this year when high-end apparel chain Ted Baker Canada filed for restructuring under Canada’s Companies’ Creditors Arrangement Act and Chapter 15 bankruptcy in April, leading to the liquidation and closure of all its North American stores. The company operated 31 Ted Baker stores in the U.S., 25 in Canada, eight Brooks Brothers Canada shops, and seven Lucky Brand Canada stores.
Meanwhile, Anne Fontaine USA, the U.S. affiliate of the Paris-based luxury boutique chain, filed for Chapter 11 Subchapter V bankruptcy protection on January 16 in the U.S. Bankruptcy Court for the Southern District of New York. This move was made to reorganize the business, which has struggled to recover from the financial distress caused by the Covid-19 pandemic. Anne Fontaine currently operates 17 luxury boutique locations in the U.S., 19 in Europe, three in the Middle East, and three in Asia.
McMullen Files for Chapter 11 Bankruptcy Amid Legal Dispute
Luxury fashion retailer McMullen became the latest casualty in the sector, filing for Chapter 11 bankruptcy on August 21 in the U.S. Bankruptcy Court for the Northern District of California. This filing follows a lawsuit from online competitor Moda Operandi over alleged copyright infringement.
McMullen, based in Oakland, California, reported having assets ranging from $500,000 to $1 million and liabilities between $1 million and $10 million. The company also indicated that funds would be available for unsecured creditors.
Moda Operandi’s Copyright Infringement Lawsuit Against McMullen
The bankruptcy filing came about two weeks after luxury fashion retailer Moda Operandi lodged a lawsuit against McMullen in the U.S. District Court for the Northern District of California. The suit alleges that McMullen used copyrighted product photos without permission, constituting copyright infringement.
According to a report by Sourcing Journal, the Brooklyn, N.Y.-based luxury apparel retailer filed its complaint on August 7, claiming that McMullen “committed copyright infringement with actual or constructive knowledge of, or with reckless disregard or willful blindness for (Moda Operandi’s) rights in the (photos), such that said acts of copyright infringement were willful.” The complaint included 19 copyrighted images, alongside screenshots Moda Operandi alleges were taken from McMullen’s website, showcasing skirts, dresses, tops, pants, sweaters, and jackets that Moda Operandi believes were identical or nearly identical to its own images.
Moda Operandi is seeking damages to be determined at trial and has requested an injunction preventing McMullen from using the 19 images without permission. However, all litigation against McMullen is subject to an automatic stay during the Chapter 11 proceedings.
McMullen’s Background and Operations
Founded in 2007 by Sherri McMullen, the retailer has received praise from fashion magazines such as Vogue, Women’s Wear Daily, and Harper’s Bazaar. McMullen offers women’s luxury apparel from renowned brands, including Christopher John Rogers, Dries Van Noten, The Row, Aisling Camps, and Diotima, and features a men’s luxury attire line from Dries Van Noten.
In addition to its flagship boutique in Oakland, McMullen recently expanded by opening a second boutique on August 12 in the Presidio Heights district of San Francisco. The retailer also operates an e-commerce platform on its website.
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