Brick-and-Mortar Meltdown in June: Who Got Crushed?

The private-equity protocol of asset stripping bears fruit. Today, premium-denim designer and retailer True Religion Apparel with 1,900 employees filed for Chapter 11 bankruptcy. Its celebrities-endorsed products are sold in its 140 True Religion and Last Stitch retail stores and in struggling brick-and-mortar department stores, including at Bloomingdale, Nordstrom, and Saks Fifth Avenue.
Bankruptcy rumors had been swirling since October when the company hireda law firm specialized in bankruptcy and restructuring – a dead-giveaway that shareholders and creditors are going to feel some pain.
As so many times in retail bankruptcies, there’s a private-equity angle. Private-equity firm TowerBrook Capital Partners had acquired True Religion for about $835 million in 2013. It took just four years of stripping out assets and piling on debt to reach this magic point.
The court document revealed that the company is now saddled with $535 million in debt, against only $243 million in assets. Asset values are estimated; no one knows what they’re really worth during a fire sale. Dogged by declining sales, the company already closed 30 stores and slashed its workforce. In its last fiscal year ended January 28, 2017, revenues had dropped to $370 million, generating a white-hot loss of $78.5 million.

This post was published at Wolf Street by Wolf Richter ‘ Jul 5, 2017.