Lucky Brand Files for Bankruptcy Partly Due to Coronavirus

The latest company to file for bankruptcy protection amid the coronavirus pandemic is denim retailer Lucky Brand.

The Los Angeles-based company filed for Chapter 11 protection this past Friday and blamed its troubles partly on COVID-19. Lucky also announced plans to close 13 stores and could shutter more during the bankruptcy process.

The company additionally said that it has a deal lined up to sell itself.

In a court filing, chief restructuring officer Mark Renzi described a proposal to sell Lucky to buyers led by apparel retail operator SPARC Group for $140.1 million in cash and $51.5 million in credit. According to the company, the offer would preserve much or all of the company’s current network of stores.

The filing revealed that SPARC operates under the Aeropostale and Nautica brands that that are owned by Authentic Brands Group and mall operator Simon Property Group, one of Lucky’s key landlords.

Renzi said the company has a backup bid, and Lucky asked the court to approve a bid process to see if there are better offers. Lucky expects to have a closing sale by mid-August.

According to Renzi, the company had been undermined by a shift among shoppers away from bricks-and-mortar stores, compounded by temporary store shut-downs due to the virus outbreak this spring.
Limited liquidity also hurt the company which made it harder to get new inventory from vendors. Renzi said some key vendors began requiring payment on delivery or other new terms, adding to financial pressure on the company.

Created in 1990, Lucky Brand operates more than 200 U.S. stores, mostly in shopping malls, and sells items at other chains including Macy’s, Nordstrom and Costco.

Renzi said the company has “generally been profitable” over its 30-year history.