BIG NEWS: Bankrupt clothing retail chain liquidates, closes all stores
According to The Street, Maintaining demand for clothing styles is crucial for the success of retail apparel companies. However, the COVID-19 pandemic had a devastating impact on clothing retailers, leading to store closures, supply chain disruptions, and a significant decline in brick-and-mortar shopping. As more people worked from home, there was a noticeable shift away from formal office attire toward more casual styles.
Bankruptcy Filings in the Retail Apparel Sector
The list of clothing retailers that filed for bankruptcy due to the pandemic in 2020 is extensive. Notable companies filing for Chapter 11 and closing stores include Brooks Brothers, New York & Company, Men’s Wearhouse and its parent company Tailored Brands, and J. Crew. Additionally, several department stores reliant on clothing sales, such as J.C. Penney, Neiman Marcus, Lord & Taylor, and Stein Mart, also succumbed to bankruptcy.
More recently, teen clothing retailer Rue 21 filed for Chapter 11 bankruptcy in May, resulting in the closure of all 540 of its locations nationwide.
Challenges Facing the Apparel Industry
The apparel industry has been grappling with several challenges, including a significant decline in demand for office attire as remote work became the norm. Furthermore, rising costs of labor and materials have compounded these difficulties. In particular, a surge in cotton prices in 2022 increased production costs, adversely affecting revenue and liquidity for many apparel makers.
Salt Life’s Liquidation Process
In a notable development, the struggling casual apparel chain Salt Life announced its decision to liquidate and shut down its 28 remaining stores across 10 states. This announcement came after brand management company Iconix International and liquidator Hilco Consumer-Retail Group completed the acquisition of Salt Life as part of the Delta Apparel bankruptcy case, according to a statement released on September 24.
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Salt Life, founded in Jacksonville Beach, Florida, in 2003, initiated liquidation sales on September 20, just four days after Judge Laurie Selber Silverstein approved the acquisition in the U.S. Bankruptcy Court for the District of Delaware. Iconix and Hilco secured the Salt Life assets for $38.74 million during a virtual auction on August 27.
Details of the Liquidation Sale
The organized wind-down of Salt Life stores will take place over the next few months, with liquidation sales including all inventory, furniture, fixtures, and equipment. Discounts of up to 40% will be offered on various products, including t-shirts, shorts, performance clothing, hoodies, and tumblers.
Customers can use gift cards for the first 30 days of the sale, but acceptance will cease on October 20, 2024. Additionally, returns for merchandise purchased before September 20 will be allowed within the first 30 days of the sale, while all purchases made on or after September 20 will be final.
Hilco will also oversee the sale of inventory from distribution centers through a streamlined wholesale process.
Delta Apparel’s Chapter 11 Filing
Salt Life’s former parent company, Delta Apparel, filed for Chapter 11 protection on June 30, seeking to sell its assets. The company faced reduced demand for its products and struggled to obtain raw materials necessary for manufacturing, leading to a decline in liquidity. Furthermore, Delta Apparel encountered challenges in raising capital to support its operations, ultimately contributing to the decision to file for bankruptcy.
