Rue 21 is Filing For Bankruptcy After Store Closures

This is a bummer.

Rue 21 Etc!,
Flickr | JeepersMedia

After closing 400 stores earlier this year, teen clothing retailer Rue 21 is filing for Chapter 11 bankruptcy. This is just another in a long line of stores who are feeling the pain as shopping malls become less and less popular.

According to a recent company statement, Rue 21 is discussing agreements with lenders that will help reduce the company’s debt while also providing additional capital to aid in restructuring the business.

The company began closing 400 of its 1,179 stores in April and said it would consider closing more in order to continue cutting costs. Additionally, Rue 21 will make cuts its workforce of 15,800 employees, 12,300 of which work part-time. This is obviously super heartbreaking for the people who are losing their jobs.

“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 wrote in a statement.

Rue 21 isn’t alone in filing for Chapter 11 this year. Other retailers who have filed for bankruptcy include Payless ShoeSource, Hhgregg, The Limited, RadioShack, BCBG, Wet Seal, Gordmans, Eastern Outfitters and Gander Mountain.

Rue 21 photo
Flickr | JeepersMedia

On the positive side, Rue 21 might be able to avoid total liquidation through its Chapter 11 filing. Stores such as Bebe, The Limited and Wet Seal have not been so lucky in their restructuring and faced total liquidation earlier this year and last year.

“Even in a challenging environment, we are fortunate that Rue21 has highly relevant brands, an enthusiastic and loyal customer base, and hundreds of highly performing stores,” Rue21 CEO Melanie Cox said in a statement. “The agreement with our lenders represents their confidence in Rue21’s future success even at a time of significant retail industry change.”

With more and more shoppers turning to online deals, it will be interesting to see how Rue 21 shifts its business model to interact with the changing world of retail.

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