Charlotte Russe has filed for Chapter 11 bankruptcy protection and will shutter 94 of its approximately 500 Charlotte Russe and Peek stores, while the company continues to pursue a sale to stay in business.
Charlotte Russe and Peek physical stores and e-Commerce sites are currently open and continue to serve customers. The company will provide more details about the plans for which Charlotte Russe and Peek locations will be shuttered, and their store closing sales plans, “in the near term,” according to a company statement.
So far, 17 potential buyers have signed nondisclosure agreements. “Despite some interest, no party has yet submitted a final proposal for a sale transaction,” said Brian Cashman, Chief Restructuring Officer for Charlotte Russe in a declaration filed in court. If Charlotte Russe doesn’t find a buyer, the retailer could liquidate its business entirely.
The retailer received a commitment for a debtor-in-possession (DIP) loan of $50 million. The financing will support the company’s operations and administration during the Chapter 11 proceedings, upon court approval.
Charlotte Russe is yet another example of a retailer that has performed poorly under private equity ownership. In 2009, private equity firm Advent International bought Charlotte Russe in a $380 million deal. The retailer has since tried to downsize the debt load stemming from the acquisition, reducing it from $214 million to $90 million. But the company has experienced lagging sales, seeing revenue plunge significantly from $928 million in 2017 to $795 million in 2018. In Q3 2018, Charlotte Russe saw comparable store sales dip 11.7%., illustrating just how poorly established stores have driven revenue.
The company has shared struggles similar to those of many mall-based apparel retailers, with slowing foot traffic stemming from poor merchandise selection, lack of integration between stores and e-Commerce and a subpar online experiences in general.
The retailer has been a top contender for bankruptcy since 2017, with Moody’s Investors Service and Fitch Ratings both listing Charlotte Russe as a distressed retailer in risk of defaulting. A few of the retailers named in both lists filed for bankruptcy since then include Sears, Gymboree, Rue21, True Religion Apparel, Charming Charlie, Nine West and Claire’s Stores.