Teen clothing retailer rue21 files bankruptcy for 3rd time

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By Yosi Yahoudai
Founder and Managing Partner

| Bloomberg

Teen clothing retailer rue21 has filed bankruptcy to close its stores and sell its brand, marking the third time the business has sought court protection and the latest sign of trouble for mall-based outlets.

The retailer, which is majority owned by Blue Torch Capital, filed Chapter 11 Thursday in Delaware, listing assets and liabilities each of between $100 million and $500 million. The company said it will conduct going-out-of business sales over the next 4 to 6 weeks while it runs a sale process for the retailer’s intellectual property.

The chain previously filed Chapter 11 in 2017 and 2002 under the name Pennsylvania Fashions. Headquartered outside of Pittsburgh, rue21 operates roughly 540 locations in malls and other outlets across the US, according to court documents.

Rue21 Chief Financial Officer Michele Pascoe said in a sworn statement that company advisers marketed the business before the Chapter 11 case. The company determined it would generate more money for creditors by conducting store closing sales, liquidating inventory and other assets and selling the brand rather than keeping the rue21 operating as a going-concern Pascoe said.

The latest bankruptcy filing comes after the retailer overhauled its executive leadership in 2023. In March, rue21 announced the appointment of Chief Executive Officer Josh Burris and in December appointed Pascoe CFO. Burris had previously served as the head of vitamin retailer GNC Holdings Inc. following that chain’s restructuring in 2020.

Last year, rue21 also worked with with AlixPartners LLP for operational help after racking up earnings losses, Bloomberg News reported at the time. The retailer’s 2017 bankruptcy was initiated after rue21’s sales were hurt by falling foot traffic and changing consumer spending habits.

Rue21 entered into negotiations with its lenders to avert a bankruptcy filing in October 2022.

Several mall-based retail chains have filed Chapter 11 in recent years to close stores and restructure. Express Inc. filed bankruptcy in April and said it could be forced to liquidate if it can’t complete a buyout relatively quickly.

The case is New rue21 Holdco Inc., number 24-10939, in the US Bankruptcy Court in the District of Delaware.

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About the Author
Yosi Yahoudai is a founder and the managing partner of J&Y. His practice is comprised primarily of cases involving automobile and motorcycle accidents, but he also represents people in premises liability lawsuits, including suits alleging dangerous conditions of public property, third-party criminal conduct, and intentional torts. He also has expertise in cases involving product defects, dog bites, elder abuse, and sexual assault. He earned his Bachelor of Arts from the University of California and is admitted to practice in all California State Courts, and the United States District Court for the Southern District of California. If you have any questions about this article, you can contact Yosi by clicking here.