Lucky Brand Files Chapter 11, Closing Some Stores

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Lucky Brand Files Chapter 11, Closing Some Stores

By Lisa Johnston - 07/06/2020

Lucky Brand has filed for Chapter 11 bankruptcy protection and will close at least 13 stores.

The apparel brand and retailer entered into a stalking horse asset purchase agreement with SPARC Group, operator of Aéropostale and Nautica. It’s also entered into a backup purchase agreement with ABG-Lucky LLC, a newly formed subsidiary of Authentic Brands Group LLC, should the SPARC deal fall through.

Lucky operates more than 200 storefronts in the United States and Puerto Rico, all leased locations that are typically situated in shopping malls. The company will initially close 13 brick-and-mortar locations and may close additional stores during the Chapter 11 process. (Its Canadian operations, Lucky Canada, permanently closed its nine stores in the region in the spring.)

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Matthew A. Kaness, Lucky interim CEO, cited COVID-19’s impact on sales across all channels. Like most apparel retailers, Lucky closed its stores in the spring to help slow the spread of the coronavirus, as did many of the department stores selling its products. Its wholesale business Lucky’s direct-to-consumer e-commerce business accounted for 12% of its total sales in 2019, whereas its wholesale businesses accounted for 46% of its annual net sales.

“While we are optimistic about the reopening of stores and our customers' return, the business has yet to recover fully,” said Kaness. “We have made many difficult decisions to preserve the company's viability during these unprecedented times. After considering all options, the board has determined that a Chapter 11 filing is the best course of action to optimize the operations and secure the brand's long-term success. We remain committed to our associates, vendors, and business partners and appreciate the continued support through this process."

Lucky will continue to operate and has received new financing from some of its existing lenders to fund the businesses through the process.

There’s no doubt this may be the strangest back to school season on record. As class supply lists hit parents’ inboxes, many are still debating if they will even send their children into the classroom this fall. However, as the COVID-19 pandemic continues to threaten the normalcy of purchasing paper and pencils, there’s still time for retailers to ramp up their back to school promotions.

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