Some of you may recall that earlier in the year, Standard and Poor’s and Fitch Ratings put together “death watch” lists of distressed American retailers. Proving that the ratings agencies knew what they were talking about, several of these distressed retailers have indeed imploded.
The latest retail business to collapse is Charming Charlie:
Charming Charlie’s story is becoming a familiar one this year. A specialty apparel seller runs up against shifting consumer habits, which are compounded by its own operational and financial woes, and heads into bankruptcy court with a plan to shrink its footprint and balance sheet.
Charming Charlie CFO Robert Adamek said in a court filing that “the general shift from brick-and-mortar retail has been further exacerbated by merchandising miscalculations, lack of inventory [and] an overly broad vendor base, all of which has led to underperformance and reduced sales.” Over the last several years, Charming Charlie’s revenues have fallen 22% and its profits have dropped off by more than 75%, Adamek added.
While the company tries to adapt to larger shifts in the retail landscape, in the short run the retailer simply found itself “out of cash to responsibly operate its business,” Adamek said. At the time of filing, the company had less than $1 million in cash balances and less than $1.8 million available under its revolving credit facility. That followed a fall where the retailer operated without enough liquidity. Adamek said that cash-on-delivery demands from its vendors “have paralyzed the stream inventory.”
The retailer searched for additional, incremental liquidity, with reports breaking in October that Charming Charlie was in search of a loan to help it through the holiday season. But Adamek said those efforts failed, and the company was “unable to secure appropriate inventory for the November and December holiday season,” creating the need for a Chapter 11 filing. In a statement Wednesday, Interim CEO Lana Krauter said, “We are confident that by reducing the size and scale of our business, we can focus on the core strengths that make the company successful.”
Founded in 2004, the retailer made a name for itself by organizing accessories and jewelry assortments by color and pricing its products in a “sweet spot” between more upscale retailers like Macy’s and specialty sellers like Claire’s that cater to younger shoppers.