By Kyle Olson
Betsey Johnson LLC, a U.S. fashion designing firm, has filed for Chapter 11 bankruptcy protection according to Reuters.
The company, based out of New York City, cited declining sales and profitability due to high-end fashion being hit hard by the state of the economy.
The company is seeking offers to buy all or parts of its business according to court documents.
Betsey Johnson is listing assets at $21.3 million and total liabilities worth $15.4 million at the end of 2011, also according to court documents.
The company has over 65 Betsey Johnson retail stores worldwide. They also sell merchandise in departments stores such as Nordstrom and Macy’s.
Last year, Betsey Johnson LLC recorded sales of $60 million.
Since 2007, sales have dropped 20% and profitability has more than halved according to court documents.
Betsey Johnson LLC, named after its founder, had gotten its start in 1978. The fashion label is known for their youthful designs with rock-n-roll and hippie themes.
According to Reuters, the company had enlisted Morpheus Capital Investors in early 2012 to secure new equity investors or to sell the business. Over 20 potential buyers and investors were contacted but Morpheus was unable to secure a deal.
The company has requested a Debtor-In-Possession financing of $2.5 million in order to fund the bankruptcy operations, according to the court filings.
U.S. Economic Growth Slows
Given the state of the economic growth, high end retail institutions have been hit with fewer consumers willing shell out for premium-priced garbs.
According to The New York Times, U.S. economic growth slowed from 3% in the last quarter of 2011 to 2.2% in the first quarter of 2012.
One reason why Betsey Johnson LLC could not find a suitor for investment or sale may be due to the fact that U.S. business investments have declined. Alongside slow investment rates, economists warned that consumer spending cannot be sustained without hiring and wage increases.
Experts have stated that business remain very cautious in new investments in the current U.S. economy.
However, The Federal Reserve’s growth projections for 2012 were revised, showing 2.4 percent to 2.9 percent rather than the previously estimated 2.2 percent to 2.7 percent growth. Ben Bernanke, Chairman of the Federal Reserve, stated that the Fed would stay on their course of keeping interest rates low through 2014.
The Retail Fail
Betsey Johnson doesn’t stand alone in the category of companies struggling in the retail industry.
Recently H&R Block announced that it will be closing 200 underperforming stores and are set to lay off over 300 employees as it realigns to serve the ever-growing digital tax filing markets.
According to Reuters, Jackson-Hewitt, H&R Block’s main competitor filed for pre-packaged bankruptcy protection last year citing the disparity in retail profits from electronic competitors like TurboTax.
As the economy slows, and job growth mirrors the slow economic status, consumers take notice. Experts suggest we may see even more retailers preparing to file for bankruptcy in the near future.