- The parent company of fashion brands Joie, Equipment and Current / Elliott filed for chapter 11 Monday. The bankruptcy follows a prolonged decline in sales, liquidity issues and a disrupted sales process, which the company has all attributed to the pandemic.
- The Collected Group has filed a prepackaged plan that would deliver equity to certain secured lenders.
- The company is also looking to completely reduce its physical footprint to focus on e-commerce and wholesale. At its largest, the company ran 33 brand name stores, according to its chief restructuring officer.
Founded in 2001, The Collected Group unites denim (Current / Elliott) and silk (Equipment) clothing brands with contemporary women’s fashion label Joie.
The latter accounts for 55% of sales and is “one of the most sought-after contemporary brands for the fashionable woman,” according to Evan Hengel, managing director of Berkley Research Group who served as the company’s CFO and is currently its head of restructuring.
Hengel touted the celebrities who wore The Collected Group brands, dropping the name in court documents Jennifer Aniston, Meghan Markle, Kate Middleton, Sarah Jessica Parker and others.
But A-listers and influencers couldn’t save the company from its operational and financial woes. The company restructured once already in 2018, after a new business management system, in Hengel’s words, “became operational without critical storage or operational logistics functionality.” flow and relationships with wholesale customers, which includes department stores.
The fallout from profits and sales led to an out-of-court restructuring, after which KKR (a lender to the company then and now) converted some debt into shares and took over ownership from the former owner of private equity. of the company, TA Associates.
With more money to invest, The Collected Group began to expand its e-commerce and wholesale channels, which improved the company’s profits. At the end of 2019, the company launched a process to sell itself “to build on this success,” Hengel said. The company had interested buyers, but COVID-19 has struck. Potential buyers have lowered or lowered their bid prices.
Worse yet, the company’s operations have been disrupted by the pandemic. With store closings in 2020, retail revenues fell 85% for the year and wholesale revenues fell 70%. The only bright spot was e-commerce, which grew 37% over the year to $ 27.8 million and accounted for about half of The Collected Group’s total revenue, according to Hengel.
With stores closed and then struggling amid the pandemic even after they reopened, the company has chosen to end its physical retail operations. He had negotiated new terms with landlords, including variable rent, but had only made deals with a few. Those that have opened have underperformed, with the pandemic still weighing on pedestrian traffic.
“These struggles, coupled with a growing number of notices of default from other owners, caused the company to make the difficult decision that physical retail operations were no longer viable for the company,” Hengel said.
In bankruptcy, the company looks to deleverage with a plan that cuts secured debt to $ 30 million, from more than $ 185 million. According to Hengel, this would allow the fashion company to save jobs and supplier relationships, and also “preserve and enhance its unique and highly regarded branded offerings through e-commerce and wholesale. “. The company restarted its sales process before the bankruptcy. , but so far the offers are well below the value of the secured debt.
The company is requesting a confirmation hearing of its reorganization plan within 45 days.
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