This Teen Retailer Is The Latest To File For Bankruptcy

Rue 21 officially filed for Chapter 11 bankruptcy protection in a Pennsylvania court this week, Fortune reported. According to a statement from the company, the once-mighty teen retailer will receive "$125 million in debtor-in-possession (DIP) financing from existing lenders, and up to $50 million in new money term loan DIP financing from a group of its existing term loan lenders." With those funds, Rue 21 hopes to "support day-to-day operations during the reorganization," the statement reads. More store closures — on top of the 400 outposts slated to shutter, as announced earlier this spring — are expected.
This story was originally published on April 18, 2017.
2017 has been a rough one for retailers. In March a number of beloved mall stalwarts either shuttered doors or grossly downsized.
Payless, Wet Seal, Bebe, American Apparel, J.C. Penney, Guess and Abercrombie & Fitch are just a few of the retailers which will soon be no more or are closing a number of stores. This week Rue21 is now added to that list.
The teen retailer announced today that it would be closing 400 of it’s stored across the U.S. The company’s fleet currently includes roughly 1,200 stores in 48 states. According to WWD, a spokeswoman said the company is currently speaking with lenders, noting that the Rue21’s financial state is “unfavorable.”
“As part of our ongoing business transformation into a more cost-efficient operator, we are closing unprofitable stores across our fleet in order to focus on our many hundreds of highly profitable locations,” the spokeswoman said.
Two weeks ago the company went into forbearance at the risk of defaulting on loans.
“We continue to work with our lenders and bondholders to find the best solution to the company’s need for more capital and for a business model with less debt, in order to ensure that we move forward as a stronger and more sustainable enterprise,” she continued.
As teens and adults turn to online shopping in droves, it’s not hard to see why so many retailers are now on the chopping block. While it’s sad to see so many of our childhood retailers put out of business, it’s even more disheartening at how many jobs will be lost in the process.
In an interview with Business Insider, Mark Cohen, director of retail studies at Columbia Business School, commented on the “retail apocalypse.”
“This is creating a slow-rolling crisis," he said. "The people that work in retail stores will lose their jobs, then spend less money in retail stores because they are no longer employed. That creates a cascade of economic challenges."

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