Retailer Rue21 seeks professional consultants for potential reorganization, according to the Wall Street Journal.
In the dynamic world of retail, companies like Rue21 have faced significant shifts over the past few years. Daily operations, once familiar, have been re-examined, with topics such as shrink and pricing taking on renewed importance.
Recent months have seen an increase in risks for apparel, department stores, and specialty retail, according to data from S&P Global Market Intelligence. This trend is further reflected in the rising number of companies at risk of bankruptcy, as measured by data from CreditRiskMonitor.
Amidst these challenges, Rue21, a fast-growing teen retailer in the early 2000s, has shown resilience. In late 2020, the company was able to retire debt while increasing availability under its asset-based facility. This was followed by an announcement of an expansion of its store footprint, with sales trending up.
However, the retail and apparel markets have gone through several shifts since then. Consumers have pulled back on discretionary spending as they hedge against inflation on essential goods, causing a broad shift in demand and sales. This has exposed or created new financial weaknesses for some in the industry.
Rue21, which filed for and emerged from bankruptcy in 2017, closed more than 400 stores and turned ownership over to its lenders during that time. The company has since hired Ducera Partners as advisors for potential restructuring.
In an effort to avoid filing for Chapter 11, Rue21 is in talks to raise financing. The company has also shown promising signs of success, beating its own expectations and increasing its comparable sales year over year in late 2020.
Looking forward, Rue21 plans to open 15 new stores after a year when the market saw a high-water mark in retail bankruptcies and store closures. The company has also consulted Lazard for advice regarding a potential debt restructuring in recent months.
As Rue21 continues to navigate the challenging retail landscape, it remains to be seen how the company will adapt and thrive in the new environment. Despite the struggles faced by several apparel retailers, Rue21's resilience and strategic moves suggest a promising future for the teen retailer.
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