Brooks Brothers enters Chapter 11, seeks buyer
Brooks Brothers has filed for bankruptcy in the US, the latest US retail victim of the Covid-19 pandemic.
However, analysts are confident the struggling apparel retailer will find a buyer and the brand will endure along with a scaled-down store network.
Brooks Brothers has in recent years invested substantially in stores in Hong Kong. Inside Retail Asia has reached out to the company’s local executive team but had not received a response at the time of writing.
Like many global retailers collapsing in the wake of the pandemic, 200-year-old Brooks Brothers was facing challenges before its stores were forced to close in core markets as part of government pandemic precautions.
Neil Saunders, MD at GlobalData Retail, says that while the brand remains well regarded by consumers, Brooks Brothers has long suffered from a failure to decisively adapt to changing trends.
He said current leadership deserves credit for rebuilding the attributes of quality and design which had waned under previous ownership, but when it comes to tastes and style, “Brooks Brothers has been swimming against the tide”.
“Its formal, old-school approach found favour among mature and more traditional demographics, but it has become increasingly out of step with a new generation of consumers who are looking for a more edgy approach to smart casual. They increasingly found it in niche brands like Kiel James Patrick or more mainstream players such as Vineyard Vines and even J Crew. This dynamic, along with the increased casualisation of workwear which has seen a shift away from suits and ties, has made it increasingly difficult for Brooks Brothers to drive growth.”
Under Chapter 11 protection Brooks Brothers will continue to operate while it restructures. Bloomberg reports it has assets and liabilities listed of $500 million each and has arranged a $75 million bankruptcy loan to ensure ongoing trading.
The brand which once dressed Abraham Lincoln has about 250 stores trading in the US, along with its overseas shops.
Saunders says that although the pandemic has severely eroded the company’s outlook, a review of the business was already underway, which included options for repositioning the brand.
“However, the pandemic has disrupted this process and sharpened many of the underlying trends Brooks Brothers was already struggling to adapt to. From our data, year-on-year [US] sales of men’s formal clothing fell by 74 per cent during April, May and June, while men’s smart-casual apparel sales dipped by 62 per cent over the same period. While this deterioration will ease over time, demand will remain suppressed for the rest of this year and well into next as office working, business meetings, and socialising are all reduced. This leaves Brooks Brothers very exposed to a depressed market.”
Saunders expects the company will have to exit expensive city-centre stores that due to the reducing numbers of office workers in downtown locations will no longer be economically viable to run. Some factory outlet stores will suffer due to reduced demand and lower footfalls in the wake of the pandemic.
“These property problems can most efficiently be resolved through a bankruptcy process. If successful, this will streamline the business and get it into a state that is more attractive to a potential buyer.
“There will be no shortage of interest in Brooks Brothers. The brand has a solid foundation on which a new owner can build, and it has a good digital business that has the potential for future growth. However, the process of reinvention will not be easy; it will take time, capital and effort to reconfigure Brooks Brothers into a retailer ready to serve the needs of modern consumers,” said Saunders.