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Teen Fashion Chain Closes Stores, Files for Bankruptcy for the Third Time

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A picture of rue21 store
Source: Pinterest

Teen Fashion Chain Closes Stores, Files for Bankruptcy for the Third Time

Source: Pinterest

The 540 locations of the teen clothing brand rue21 are finally closing. This is the third time a Chapter 11 bankruptcy case has been filed.

The company has been in retail for about 50 years and is headquartered in Warrendale, Pennsylvania. Over the last few years, Rue21 has expanded to 1,200 sites.

The Origin of the Fashion Brand

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Rue21 was established as Pennsylvania Fashions Inc. in 1970. The business went by several brand names before declaring bankruptcy in 2002. After exiting bankruptcy in 2003, it changed its name to rue21.

According to the report, rue21 attempted to sell its company but could not find a buyer prepared to pay more than it would make by selling its inventory and closing its outlets. Gordon Brothers, a financial consultant, has been brought in to assist with store closure sales.

Rue21 End Of Business

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The business has been having financial difficulties. The first bankruptcy was filed in 2003, followed by one in 2017. Rue21 plans to close all of its outlets quickly and discontinue its retail operations.

The clothing store employs 4,900 people and owes $700 million, as reported. The corporation hoped for change before deciding to close permanently.

Final Sales of the Business

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Large-scale end-of-business sales will take place over two months. According to court filings, Reu21 is holding the sales in conjunction with the end of commercial operations.

The properties that were listed for sale also resulted from financial instability. Delaware’s Wilmington was home to the court.

Challenging Moments For Businesses

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The past few years have been challenging for businesses that primarily operate out of indoor shopping malls. The store Rue21, which mostly sells items for teens and tweens, is the most recent illustration of this persistent issue.

Rue21 offers reasonably priced clothing and accessories ranging from party dresses to graphic tees but has had difficulty reviving its earlier years of success.

Leadership Chain

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The retailer reorganized its top leadership in 2023 before its most recent bankruptcy filing. In December 2023, Rue21 named Michele Pascoe its Chief Financial Officer after announcing the hiring of Josh Burris as its Chief Executive Officer in March 2023.

Following the 2020 chain’s restructure, Burris had previously been CEO of vitamin retailer GNC Holdings Inc.

Causes of the Negative Impact

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According to interim CEO Michele Pascoe’s court filing, the COVID-19 pandemic and associated unfavorable market trends, such as a shift in customer purchasing habits from walk-in retailers to online merchants and evolving consumer taste, have negatively affected Rue21.

These difficulties, common to many in the retail industry, exacerbate the company’s precarious financial status.

Pascoe’s Statement

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In his statement, Pascoe attributed Rue21’s bankruptcy to “under-performing retail locations, increased industry competition and the uptick in online shopping, as well as challenges raising capital” and macroeconomic headwinds like inflation.

Based on Neil Saunders’ analysis as managing director and retail analyst at GlobalData Retail, a key factor contributing to Rue21’s demise was the brand’s “growing irrelevance to teen consumers.”

Businesses Suffer Financial Difficulties

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Rue21 is the most recent retailer experiencing financial difficulties. However, 45 US states are home to its stores, and they will all be closed down. Also, Express revealed it was liquidating around 100 locations and filed for bankruptcy recently. Another network of bargain stores, 99 Cents Only Stores, announced its closure in April.

Also, a textile retailer declared bankruptcy, stating it was in its “strongest financial foundation in many years,” but the company exited the financial crisis.

Another Company Announced Its Closure

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Sam Ash Music is closing its doors. The 100-year-old, family-run retailer of musical instruments announced with great sadness that it was closing all 42 of its locations across the country. According to the retailer, located in New York, store closing sales have begun.

The Ash family stated, “This sad news also presents a fantastic opportunity for great deals across our premium selection of musical instruments & pro sound equipment.”

From Rise to Fall

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Rue21’s rise from a peak of 1,000 stores to its current position is one of swift growth punctuated by a sobering financial reality check. Due to this sharp increase and decline, the corporation has had to review its strategy over the years constantly.

The upcoming closures will drastically change the mix of retailers in these malls, which will impact not only Rue21 but also the shopping centers as a whole.

Website Shuts Down

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The Rue21 website has likewise stopped working, with the notice “Our site is being updated” appearing on the main page. Return shortly.” Store closures are scheduled for the next four to six weeks.

Retailers predominantly operating out of malls or shopping centers that rely significantly on spillover foot traffic have had a difficult few years.

Customers Don’t Enjoy Shopping at the Malls

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Despite the widespread misconception that they are closing because of COVID, the truth is that consumers no longer enjoy shopping as much as they once did.

Consider the most recent time you visited a mall. Like many Americans, you probably took that trip a long time ago and won’t be taking one for a while.