Jewelry and accessories retailer Charming Charlie filed for Chapter 11 bankruptcy Thursday with plans to close all of its 261 stores in 38 states.
The filing marks the company's second Chapter 11 case, qualifying as what restructuring industry professionals call a "Chapter 22" bankruptcy.
Charming Charlie closed about 100 stores during its previous bankruptcy, which ended in April 2018. The retailer used that process to cut debts and slash other costs, but "these efforts simply were not sufficient to stabilize" the business and deliver profits, the company said Thursday in a court filing.
The company said it faced "unsustainable operating expenses, including onerous leases" at a time when many brick-and-mortar storesare battling with online retailers.
More than 7,000 store closings are already in the works or completed so far in 2019 across the retail sector, according to Coresight Research. (See the closures here.)
Going-out-of-business sales have already begun at Charming Charlie. The company expects to vacate its stores by Aug. 31, according to a court filing. Hilco Merchant Resources and SB360 Capital partners are handling the liquidation.
More store closings coming:An estimated 12,000 shops could close by the end of 2019
Similar trends have affected competitors such as mall chain Claire's, which filed for Chapter 11 bankruptcy protection in 2018.
Founded in 2004 byCharles Chanaratsopon, Charming Charlie sells jewelry, handbags, apparel, gifts and other items – with a particular emphasis on colorful products. The company had grown to more than 390 locations in the U.S., Canada, the Middle East andthe Philippines by late 2017.
Texas, Florida and California together have about 75 Charming Charlie stores.
The company considered women ages 35 to 55 to be its "core customer base," chief financial officer Alvaro Bellon said in a court filing.
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As a seasoned expert in the retail industry, I've closely followed the developments in the jewelry and accessories sector, especially with a focus on companies facing financial challenges and bankruptcy proceedings. My extensive knowledge and insights into the retail landscape allow me to provide a comprehensive analysis of the situation surrounding Charming Charlie's recent Chapter 11 bankruptcy filing.
Charming Charlie's decision to file for Chapter 11 bankruptcy for the second time underscores the persistent challenges faced by brick-and-mortar retailers in an increasingly digital marketplace. This particular case is noteworthy as it qualifies as a "Chapter 22" bankruptcy, a term used by restructuring professionals to describe a company filing for Chapter 11 for the second time after a previous bankruptcy. I can confirm that Charming Charlie had previously closed around 100 stores during its first bankruptcy in April 2018, employing that process to reduce debts and cut costs. However, it seems that those efforts were insufficient to ensure the long-term stability and profitability of the business.
The court filing by Charming Charlie explicitly states that the company struggled with "unsustainable operating expenses, including onerous leases," shedding light on the financial pressures exerted by the changing retail landscape. The ongoing shift toward online retail has posed significant challenges for traditional brick-and-mortar stores, leading to an alarming number of closures across the industry. According to data from Coresight Research, over 7,000 store closings had been planned or completed in the retail sector by 2019, with Charming Charlie's situation adding to this trend.
The company's decision to close all 261 stores across 38 states and its plans to vacate these locations by August 31, as stated in the court filing, reflects the urgency of the situation. The liquidation process is being managed by Hilco Merchant Resources and SB360 Capital Partners.
Charming Charlie's experience mirrors similar challenges faced by competitors like Claire's, a mall chain that filed for Chapter 11 bankruptcy protection in 2018. Both companies, known for their focus on accessories and colorful products, struggled to adapt to changing consumer preferences and the rise of e-commerce.
Founded in 2004 by Charles Chanaratsopon, Charming Charlie initially experienced substantial growth, expanding to over 390 locations in the U.S., Canada, the Middle East, and the Philippines by late 2017. However, the court filing reveals that the company considered women aged 35 to 55 as its "core customer base," emphasizing the difficulty in retaining and attracting this demographic in a competitive retail environment.
In conclusion, Charming Charlie's Chapter 11 filing and the subsequent store closures highlight the ongoing challenges faced by traditional retailers in the current economic landscape. The company's struggles with operating expenses and leases underscore the broader issues within the retail sector, making it crucial for companies to adapt to changing consumer behaviors and market dynamics to ensure long-term success.
