A teenager's shopping habits, as well as changing fashion trends, can directly impact which stores will be frequented. Today, many teens are not going to the mall as often and are choosing to spend their dollars in stores that are considered more fashion-forward. This can adversely affect many teen-centric clothing companies. New Jersey businesses who are feeling the effects of shoppers' changing habits may turn to Chapter 11 as a way to get the debt relief they need.
Delia's, a teen clothing retailer, has announced that it will be filing for Chapter 11 bankruptcy protection. The company will be closing down all of its stores and distribution centers. During the weeks leading up to the closure, Delia's will be hosting going out of business sales in an attempt to liquidate assets in order to pay down the company's debts.
The retailer made the decision to file after it was unable to secure additional investments or a merger. Delia's has had declining sales for an extended period and has not reported a profit for nearly seven years. Stock in the company has been declining over the last year and fell to 2 cents per share after the announcement.
With the help of the court, New Jersey businesses can leverage Chapter 11 bankruptcy to help them deal with their financial losses. This process will hopefully allow the businesses to obtain cash flow to pay down their debt and keep the doors open if they so choose. By reorganizing, the business could also make itself more desirable to a suitable prospective buyer, thus resulting in a stronger financial future for the business and potential investors.
Source: abcnews4.com, "Teen retailer Delia's to liquidate operations", Dec. 5, 2014