Retailers were already being pushed to the brink before the coronavirus pandemic led to widespread stay-at-home orders that gutted sales. In 2019, RTW said revenue fell more than 7 percent, to $827 million, and recorded a net loss of $61.6 million after locking in a $4.2 million profit the year before.
In March, joining other retailers as the outbreak took hold of the country, RTW announced plans to temporarily close stores and furlough workers. Now the bankruptcies are piling up — including J. Crew, Neiman Marcus and J.C. Penney — highlighting the punishing financial environment for the industry.
The challenging retail environment coupled with the impact of the coronavirus pandemic have caused “significant financial distress on our business, said Sheamus Toal, the chief executive of RTW , in a statement. The New York Stock Exchange suspended trading of the company’s common stock last week.
In its Chapter 11 filing, RTW listed assets of about $412 million and liabilities totaling roughly $396 million. The New York City-based company said its stores will continue to operate during bankruptcy proceedings, noting that more than 90 percent of its locations have reopened since shutdown orders were lifted. But the future of these locations is uncertain.
Sheamus said a sale of the business or parts of it could offer the company the best path forward.
The retail industry has been battered by an array of economic forces that in many cases have been amplified by the pandemic, from the accelerating growth of online shopping to rapidly shifting apparel trends to rising rent and untenable debt burdens. RTW said the company expects to repay its outstanding loan balance of $12.7 million by the end of August.
Even as public health restrictions have eased, retailers are still coping with plummeting foot traffic. And with many would-be customers still working from home, there’s less demand to maintain a wardrobes for the office or to socialize. To preserve cash amid collapsed demand, retailers have stopped paying rent, furloughed workers and canceled new inventory orders. Those emergency measures for many businesses have not been enough.
“There’s not really much that retailers can do,” said Sucharita Kodali, a retail analyst at Forrester Research. Bricks-and-mortar apparel brands face a tremendous competition from online sellers, and many companies have been slow to adapt to changing consumer tastes, like the popularity of athleisure, she said.
The U.S. economic recovery is expected to last beyond this year, setting up a disappointing holiday season for many businesses. “This is a story that we are seeing in a lot of different industries,” she said.
The country is also suffering historically high unemployment, squeezing consumer spending that companies would need to stage a comeback. Last week, another 1.3 million people filed first-time unemployment claims. The numbers of new unemployment filings have remained above a million each week since the pandemic began in mid-March.
RTW is evaluating the sale of its e-commerce business and the intellectual property of its brands, the company said.