Rue21, a prominent teen fashion retailer, is closing all 543 of its stores in the United States. As the company clears its inventory over the next four to six weeks, customers will be able to take advantage of discounted deals.
Clearance items are anticipated to be discounted initially at 20 to 50% off, with prices potentially reaching as high as 90% off to liquidate remaining inventory that does not initially sell. After this clearance period, the 40-year-old chain, which once operated 1,200 stores at its peak, will cease to exist.
Rue21 Resorting to Stock Liquidation Than Selling The Stores
According to court documents, attempts were made to sell Rue21, but none of the offers matched the potential proceeds from liquidating the stock and closing down. Rue21 operates in strip malls, shopping malls, and outlet centers across 45 states. Texas hosts the highest number of stores, at 51, followed by Georgia with 39, while Florida and North Carolina each boast 30 stores.
Rue21's website displayed a message stating it was "being updated" over the weekend, suggesting speculation on its preparation for the upcoming closing-down sale, which is expected to occur online and in physical stores. The company's 4,900 employees will remain in their positions during the clearance period to assist in clearing the stock.
Series of Financial Challenges Resulting in Bankruptcy Filings
Following its first filing in 2003, the company experienced growth, expanding to over 1,200 stores by 2013, focusing on the ethos that fashion should be fun and accessible to all. However, another bankruptcy filing resurfaced in 2017 due to financial challenges that necessitated the company restructuring its operations, closing 400 underperforming stores, and renegotiating leases.
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The most recent Chapter 11 bankruptcy filing will result in the closure of all Rue21 stores. According to court documents, "going out of business sales" will occur over the next four to six weeks across all locations, as the company currently has approximately $200 million in debt.
Rue21 is also in the process of selling its brand name and other intellectual property, allowing its competitors to relaunch it as a smaller chain or revive it as an online brand.
While Interim CEO Michele Pascoe stated in a court filing that Rue21 was significantly impacted by a sharp increase in online shopping, exacerbated by the COVID-19 pandemic, retail expert Neil Saunders attributed the decline of Rue21 to the growing irrelevance of the brand to teen consumers. According to Saunders, managing director of GlobalData, Rue21 lacks a compelling proposition and is losing customers to other retailers and more affordable and engaging fashion platforms like Shein, adding that there is still significant uncertainty regarding the necessity of Rue21's presence in the retail market.
Other Retailers Experiencing The Same Market Challenges
Rue21 is the latest company to file for bankruptcy and announce store closures amid the industry challenges.
In April, Express, a popular mall retailer, filed for bankruptcy and announced the closure of 95 outlets and all UpWest stores.
That same month, Discount chain 99 Cents Only Stores declared that it would shut all 371 stores as it ceased operations, with dedicated shoppers rushing to locations in California, emptying shelves to take advantage of discounted prices.
In another bankruptcy announcement that month, national coffee and upscale grocery chain Foxtrot also revealed that it would be closing all its stores immediately, surprising both employees and customers. Established in 2014 in Chicago, Foxtrot had 33 locations in the Chicago, Austin, Dallas, and Washington, D.C. areas.
