rue21 Files for Bankruptcy, to Close All of its Stores

rue21, a mainstay of malls across America, has filed for chapter 11 bankruptcy protection and will close all of its stores. In a filing last week with U.S. Bankruptcy Court in the District of Delaware, rue21 said it will close its roughly 540 stores over the next two months and hold going-out-of-business sales. It will also sell its intellectual property. In the filing, interim Chief Executive Michele Pascoe blamed “challenges stemming from the COVID-19 pandemic and related adverse market trends,” including the shift away from brick-and-mortar locations in favor of online shopping, rising inflation and “challenges raising capital.”

Total Retail's Take: Mall-based specialty apparel retailers such as rue21 continue to feel the challenges of a shifting retail landscape, one that sees more shoppers opting for online purchasing, including direct from brands (and bypassing traditional retailers). Furthermore, the economic slowdown we've seen along with rising inflation has resulted in more consumers pulling back spending on discretionary categories such as apparel and accessories, which is where rue21 lives. Lastly, more competition for the teen consumer — rue21's target demographic — including from online merchants and social platforms, is putting a strain on store-based retailers that have significant capital tied up in lease agreements and generally lack sophisticated digital commerce strategies. All of these factors combined led to rue21's decision that it was no longer a viable business going forward.