US teen fashion retailer Rue21 collapses

US teen fashion retailer Rue21 has filed for bankruptcy protection.

The move was anticipated about a month ago after the company announced it would shutter about 400 of its 1179 stores across the US.

With its margins hit by fast-fashion giants including Forever 21 and H&M, Rue21 was struggling to meet interest payments on its $832 million debt. The company reported a profit of US$54 million in 2016, before interest, taxes and depreciation, which was down 48.5 per cent on the previous year, despite a 1 per cent increase in revenue.  

US sources say Rue21 is not bleeding cash and the bankruptcy protection is in part aimed at restructuring its debt while it culls its network and works on improving both margin and bottom line.

“Even in a challenging environment, we are fortunate that Rue21 has highly relevant brands, an enthusiastic and loyal customer base, and hundreds of highly performing stores,” said Rue21 CEO Melanie Cox in a statement. “The agreement with our lenders represents their confidence in Rue21’s future success even at a time of significant retail industry change.”

The company was founded nearly 40 years ago in Pennsylvania. It targets consumers who earn an average $35,000 annually, many of whom are migrating online to shop, and are extremely price-sensitive.

In its Chapter 11 filing, Rue 21 said the retail industry, in general, has experienced significant headwinds, requiring traditional brick-and-mortar retailers to adapt to an increasingly digital-focused consumer.

“While the company’s online presence is expanding and improving, the company’s historic online platform was not as robust as that of certain of its competitors.”

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