Perfumania Files for Chapter 11
Perfumania Holdings Inc, a retail and wholesale company that sells fragrances, announced last week that it has initiated a recapitalization and filed for Chapter 11 bankruptcy protection in federal court. The company said in a statement that the actions would help Perfumania “reduce its retail store count to better align with current consumer shopping patterns, increase investments in its e-commerce business” and to ultimately emerge as a private company. Perfumania hasn't announced how many stores, or which ones will be closing, but has already identified stores that are “core to the company’s ongoing operations.” The Wall Street Journal reported that Perfumania plans to close 64 of its 226 stores. The company also said employees would receive "the same salary as normal, wholesale and retail customers wouldn't see any interruption to the “flow of merchandise,” and that “our valued vendors and suppliers will be paid in full.”
Total Retail’s Take: For those watching Perfumania, the news about its bankruptcy filing isn't a surprise. Over the past year, it has been working diligently to amend its business model, reduce its cost structure, improve supply chain efficiency, optimize marketing, reduce expenses and improve operating results long term. It has also been closing underperforming stores. In the first quarter of this year, for example, Perfumania closed 43 stores. Sales have also been declining. In fiscal 2016, they fell by 13.5 percent to $468.9 million compared to the prior year period. Perfumania is the latest specialty retailer to file Chapter 11 in an effort to rid itself of unprofitable stores and reshape the business to be more competitive in a changing retail industry. In June, teen apparel retailer Papaya Clothing filed for bankruptcy with plans to close 30 stores. This year, Gymboree , rue21 and Payless have also closed stores and filed for Chapter 11.
