Lucky Brand has joined other retailers in filing for bankruptcy due to the coronavirus pandemic.
On Friday, Lucky Brand Dungarees, LLC announced they had filed for Chapter 11 bankruptcy and that the company is looking to sell the business to SPARC Group, operator of Aéropostale and Nautica.
The Los Angeles-based denim company is the latest retailer to fall victim to the effects of the COVID-19 pandemic, which has hit clothing sales as stores shut their doors during the crisis. Lucky joins J.Crew, Neiman Marcus and the long-suffering J.C. Penney, all of which filed for bankruptcy during the pandemic.
"Because of all the social distancing and states being in lockdown, retailers have suffered," Jay Sole, UBS apparel analyst, told TODAY. "It's putting companies under pressure, especially ones who were already feeling stressed, and forced them to close stores." Sole said that it's not just one company that is affected, and that more stores will close as consumers continue to increase their online shopping.
Lucky Brand has 251 stores in North America according to its website. The bankruptcy filing is meant to reduce the company's debt and facilitate its sale. The brand is currently owned by Leonard Green & Partners LP, which owes $182 million to lenders and $79 million to vendors according to court documents.
"The COVID-19 pandemic has severely impacted sales across all channels," said Matthew A. Kaness, interim CEO and executive chairman of Lucky Brand in a statement. "While we are optimistic about the reopening of stores and our customers' return, the business has yet to recover fully. We have made many difficult decisions to preserve the Company's viability during these unprecedented times.
"After considering all options, the Board has determined that a Chapter 11 filing is the best course of action to optimize the operations and secure the brand's long-term success. We remain committed to our Associates, vendors, and business partners and appreciate the continued support through this process."
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Brands like Lucky will survive in some form, though that may be through selling the company to a new owner. "It's not that the companies are not popular, it has to do with the way the finances were structured," said Sole. "Many have been forced to borrow a lot of money and suddenly, due to COVID, they can't pay their debts."
Sole said there will always be retail stores, but that the country already had too many stores as people moved toward online shopping.
"It will be based on demand," he said. For example, trying on jeans in a store requires a retailer to have a lot of inventory, which doesn't make financial sense if people are mostly shopping online. "It's an issue of profitability."