Charming Charlie, a Houston retailer known for selling flashy and colorful women’s accessories, is going out of business after filing for bankruptcy for the second time in less than two years.
The company, which filed for Chapter 11 bankruptcy protection in Delaware, plans to close 261 stores nationwide, including nine in the Houston area. Liquidation is expected to take until August 31, and will impact some 3,342 full- and part-time employees nationwide.
The retailer in its court filings reported outstanding debt of about $81.8 million, and cash on hand of about $6,000.
“The Debtors once again face issues similar to those that precipitated filing the Prior Cases: unsustainable operating expenses, including onerous leases, and constrained liquidity under our loan documents,” Charming Charlie said in its bankruptcy filing. “This lack of liquidity has resulted in reduced inventory, further exacerbating the Debtors’ lack of availability under their asset based loan. These factors combined with the continued decline of the brick-and-mortar retail industry have made it increasingly difficult for the Debtors to support their cost and capital structure.”
Charming Charlie, founded by Charles Chanaratsopon in 2004, is the latest brick-and-mortar retailer to fall victim to changing consumer preferences and the rise of e-commerce. The company joins Toys “R” Us, Payless ShoeSource and DressBarn in going out of business in recent years amid a fiercely competitive retail market.
Retailers announced 7,062 store closures nationally so far this year, surpassing the 5,864 closures reported in 2018, according to the latest Coresight Research store tracker report. The retail data firm forecasts U.S. store closures could hit 12,000 by the end of the year.
Charming Charlie closed about 100 stores during its previous Chapter 11 bankruptcy, which lasted from December 2017 to April 2018. The privately-held retailer restructured its operations and debt, however, those “efforts were simply were not sufficient to stabilize the Debtors’ businesses and ensure long-term profitability,” the company said in its filing.
Charming Charlie has obtained debtor-in-possession financing of $13 million from Second Avenue Capital and White Oak Commercial Finance to fund its operations through the bankruptcy. It expects liquidation sales will generate $30 million in revenue.
Charming Charlie does not plan to offer severance to its employees, but seeks court approval to offer a one-time bonus to help close its locations.
“The Store Bonuses are purposed to mitigate flight risk by incentivizing and rewarding store employees for staying with the Debtors through the Store Closing process,” the company said in its filing.
Francesca’s, another Houston-based women’s apparel and accessories chain, earlier this year announced it is exploring a “strategic financial review” and plans to close at least 30 stores this year as it struggles to boost sales. The publicly traded company reported a loss of $10.1 million on sales of $87.1 million during its first quarter ended May 4. Sales plunged 13 percent year over year.
Debtwire, a publication specializing in distressed debt, issued a report earlier this year that cast doubt on Francesca’s future.
“Francesca’s is confronting a host of issues that makes it challenging to complete the year without filing for bankruptcy,” Debtwire said in its report. “It does not seem likely that new management can quickly reverse the situation following a series of missteps over the past several years.”