Recession Hits Retailers Again, Urban Brands Files Chapter 11 Bankruptcy

Ashley Stewart’s parent company Urban Brands filed for Chapter 11 bankruptcy with liabilities that range from $100 million to $500 million. The company’s assets are estimated to range between $10 million to $50 million.  In the three year period before seeking bankruptcy protection, the company racked up $500 million in losses and liabilities.  In a pre-bankruptcy non-binding deal, Urban Brands, agreed to sell the assets of its plus-size women’s retail chain to a new entity, Ashley Steward LLC.  But as with any pre-bankruptcy planning or agreements, the bankruptcy court must approve it before the deal is finalized. The Ashley Stewart retail chain has more than 200 stores nationwide; but cost cutting measures implemented in bankruptcy could result in the closure of many low-performing stores.

The recession, which has stretched on for over 2 years now despite several proclamations that the recession has ended, has made a severe impact on retail stores.  Many consumers have cut back on spending, creditors have pulled back on loans to retailers and many retailers found that the expansions they implemented during the boom pushed them into bankruptcy.   The biggest problems facing retailers is the loss of business, jittery creditors and antsy investors.   Once profits begin to slip both creditors and investors demand drastic cutbacks and in some cases, credit access is limited. Retailers may try to carry on with limited credit but in some cases they simply can’t survive without the help of bankruptcy because of low sales and large existing debts.  And since many creditors won’t extend forbearance or refinance existing debt, many retailers such as Urban Brands, are left with no other choice than to restructure their debts in Chapter 11 bankruptcy.