Charming Charlie closing all its stores
Fashion accessory retailer Charming Charlie will close all its stores after going bankrupt for the second time in less than two years. More than 3,000 full- and part-time employees could lose their jobs.
Charming Charlie has 14 stores in Illinois, including locations in:
Charming Charlie Holdings Inc. filed for Chapter 11 protection in Delaware with plans for going-out-of-business sales at about 261 stores, according to court documents. The chain expects the liquidation to take about two months.
Founded in Houston in 2004, Charming Charlie has stores in malls across the U.S. It's known for organizing its bright merchandise by color, and its core customer base is middle-aged women, Chief Financial Officer Alvaro Bellon said in a court declaration.
The shutdown adds to the carnage in the retail sector that claimed more than 5,800 outlets last year, according to Coresight Research. This year is already worse, with 7,062 announced and Coresight estimating the total for all of 2019 could hit 12,000.
After emerging from its previous bankruptcy in April 2018, the company "continued to face challenges that make it impossible for Charming Charlie to continue as a going concern," Bellon said. Those included fewer mall visits by customers, landlords that required the retailer to keep some weak stores open and lack of capital. By the time it filed for bankruptcy, Bellon said, Charming Charlie had only $6,000 of cash on hand.
Charming Charlie loaded up on lower-quality inventory after its last bankruptcy in an attempt to boost liquidity -- its credit line grows along with its inventory levels. But those goods sat unsold, resulting in markdowns and thinner margins, Bellon said. In addition, vendors took longer than expected to ease off on tough trade terms, such as requiring deposits or cash on delivery.
The company arranged for a $13 million loan from existing creditors including Second Avenue Capital and White Oak Commercial Finance to help finance its wind-down. Hilco Merchant Resources and SB360 Capital Partners were hired to run liquidation sales, which are expected to raise $30 million. Hilco helped the company close outlets as part of its prior bankruptcy, court papers show. The retailer expects to vacate its stores by Aug. 31.
Charming Charlie in the past paid severance to certain terminated employees, but discontinued that program as of the bankruptcy filing, court papers show. The company is, however, seeking court permission to give bonuses to store-level employees for staying on through the liquidation.
The company has debt of about $82 million, comprised of an asset-based credit line, a term loan facility and vendor payment credit line, court papers show.
A representative for Charming Charlie didn't immediately return a call seeking comment.
The case is Charming Charlie Holdings Inc., 19-11534, U.S. Bankruptcy Court for the District of Delaware.