Teen-targeted retailer rue21, which had already announced plans to close 400 stores and shift its focus to its website, has become the latest retail chain to file for bankruptcy, though it hopes to remain operational.
The Pennsylvania-based retailer revealed Monday that it had filed a voluntary petition for reorganization under Chapter 11 bankruptcy and entered into agreements with some of its lenders to reduce debt in order to restructure the company.
The retailer said that despite filing for bankruptcy, it plans to continue normal business operations at its approximately 800 remaining locations. However, it cautioned there could be additional store closures as the bankruptcy process goes forward.
Under the restructuring plan, rue21 notes it reached agreements — which must be approved by the court — with existing lenders for $175 million in funds in order to obtain the liquidity necessary to support ongoing business operations, avoid interruptions in employee pay, honor existing customer programs, including gift cards, and maintain vendor relationships.
“These actions are being undertaken with the goal of strengthening the company’s balance sheet, achieving a more efficient cost structure, and concentrating resources on a tighter retail footprint in order to pave the best path forward for rue21,” CEO Melanie Cox, said in a statement.
Trouble at rue21 first became public in April when rumors began swirling that the chain was preparing to file for bankruptcy.
At the time, the company said it was “working to improve its operations and enhance its liquidity position.” Weeks later, the retailer said it would close 400 unprofitable stores as part of its “ongoing business transformation into a more cost efficient operator.”
With the closures, rue21 joins the growing group of teen-focused retailers that have either filed for bankruptcy, decreased their footprint, or completely closed, including WetSeal, Aeropostale, Pacific Sun, and Quicksilver
If the company eventually files for bankruptcy it would join a long list of retailers doing so in recent months, including Gordmans, hhgregg, RadioShack, Gander Mountain, BCBG Max Azria, MC Sports, Eastern Outfitters, Wet Seal, Payless, and The Limited.