The headline is annoying—it’s not the pandemic causing all these retailers to go bankrupt (many of them were headed that way before the coronavirus outbreak). It’s the response to the pandemic that’s administered the coup de grace. Nevertheless, the story is stark and frankly, frightening. From Wolf Richter at wolfstreet.com:
A dozen major brands, thousands of stores, after years of struggling. Work-from-home is annihilating casual and formal office attire.
The brick-and-mortar retailer bankruptcy plot continues to progress relentlessly. Today, it’s Brooks Brothers, the oldest men’s clothier in the US that also diversified over the decades into women’s attire, sportswear for college kids, and the like. Owned and run by Claudio Del Vecchio – often labeled “billionaire” whose dad founded Italian eyeglass maker Luxottica – Brooks Brothers filed for Chapter 11 bankruptcy in Delaware on Wednesday.
Brooks Brothers has around 500 stores globally and 200 remaining stores in North America. Unlike other American brands that have off-shored all manufacturing of clothing to cheap-labor countries decades ago, Brooks Brothers has continued to operate three plants in the US that make suits, ties, and shirts, accounting for about 7% of its sales. The rest of its merchandise is manufactured in cheap-labor countries.
Brooks Brothers, like other retailers, has been caught up in the brick-and-mortar meltdown. It has tried to get on the bandwagon, and about a quarter of revenues are from ecommerce – but that’s not helpful for its expensive-to-operate stores. In addition, it has gotten hammered by the years-long structural shift away from its costly suits to casual office attire, where it competes with everyone out there.
In November 2019 already, the company hired investment bank PJ Solomon to explore strategic alternatives, according to sources cited by fashion magazine WWD at the time. Rumors that Del Vecchio was trying to sell the company had been swirling around for a long time, which he had downplayed in 2018, saying he was “not trying to dump the company. People come to me and inquire all the time. But are we trying to sell the company? No.”