RAPAPORT... Houston-based retailer Charming Charlie has voluntarily filed for
Chapter 11 in a US bankruptcy court to enable it to restructure and reduce its
debts, it said this week.
The company, which focuses on fashion jewelry, handbags,
apparel, gifts and beauty products, has suffered from “adverse”
macro-conditions and “certain operational shortfalls,” its chief financial
officer Robert Adamek said in a court declaration Monday. Revenue has declined
more than 22% and earnings before interest, taxes, depreciation and
amortization (EBITDA) have slumped 75% in recent years, according to the
executive’s statement.
“The general shift from brick-and-mortar retail has been
further exacerbated by merchandising miscalculations, lack of inventory [and] an
overly broad vendor base, all of which has led to underperformance and reduced
sales,” Adamek explained.
Charming Charlie has secured commitments from lenders for
$20 million in “new-money debtor-in-possession” financing, as well as a $35
million “debtor-in-possession” asset-backed loan, it said in a separate
statement. The purpose of the arrangements, which are subject to court
approval, is to ensure the company can continue to meet its financial
obligations while it is in Chapter 11, it added.
The retailer, which operates more than 375 stores in the US
and Canada, intends to close underperforming outlets and simplify its
operations. Earlier this month, it launched a “back-to-basics” plan, which also
mentioned an intention to close its Los Angeles office and reduce staff numbers
at its corporate support center and distribution center in Houston.
Its physical stores and e-commerce platform will remain open
over the holiday season, with the company confirming it plans to pay vendors in
full for their goods and services provided after the filing. It is seeking
court approval to continue to pay employees’ wages and benefits, as well as to
honor customer programs, it added.
The decisions are “intended to help ensure that the company
has adequate sources of financing and the right capital structure to support
the business on an ongoing basis as we continue to implement our
‘back-to-basics’ strategy,” interim CEO Lana Krauter said. “We are confident
that by reducing the size and scale of our business, we can focus on the core
strengths that make the company successful.”
Image: Susan Montgomery/Shutterstock
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