Brooks Brothers, Founded in 1818, Files for Bankruptcy
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July 9, 2020This post was originally published on this site
Brooks Brothers, the retailer known for dressing the great and good of the United States since 1818, filed for bankruptcy on Wednesday, buckling under the pressure from the coronavirus pandemic after years of faltering sales as customers embraced more casual apparel and sales shifted online.
The company, founded and based in New York, filed for Chapter 11 restructuring proceedings in the U.S. Bankruptcy Court for the District of Delaware. Claudio Del Vecchio, the Italian industrialist who bought the brand in 2001 and still owns the company, told The New York Times in May that he would not rule out Chapter 11 as a possibility.
Brooks Brothers said in an emailed statement on Wednesday that the filing would allow it to obtain additional financing as it facilitated a sale.
The bankruptcy is the latest high-profile retail fall during the pandemic, which has caused widespread store closures and sales declines, reshaping the shopping streets of cities across the country. Since May, major names like J.C. Penney, Neiman Marcus and J.Crew have all been pushed into Chapter 11 proceedings. The chains, including Brooks Brothers, plan to keep operating, though most likely in a pared-back fashion.
“Brooks Brothers is the most iconic American brand,” said William Susman, managing director at Threadstone Advisors. “While in a different form, I am confident the brand will survive and continue for years to come. This is a case of a failed company, not a failed brand.”
Brooks Brothers, known for its suits and preppy clothes, has been hit especially hard by the virus crisis. It is an era of remote work and job interviews through Zoom, and the postponement of celebrations like weddings, bar mitzvahs and graduations.
The company, which is the oldest apparel brand in continuous operation in the United States, said it had decided to close 51 U.S. stores out of its roughly 250 locations in North America. Earlier this year, Brooks Brothers said it would close its three factories in the United States — in Queens; Haverhill, Mass.; and Garland, N.C. — spurring concern about the future of the brand and its identity as a “Made in America” name. It is currently facing a dispute in Haverhill, where a union representative for 400 workers said the company was refusing to pay severance to employees, some of whom have worked there for decades.
Brooks Brothers has a unique and rich connection to American heritage and culture. It has dressed all but four U.S. presidents, and its overcoats have been worn for the inaugurations of Abraham Lincoln, Barack Obama and Donald J. Trump, among others. It has outfitted Clark Gable, Andy Warhol and Stephen Colbert. Even Ralph Lauren started out as a salesman at Brooks Brothers in New York.
For decades, the brand was synonymous with professional American men’s wear, its somewhat boxy suits framed as a less fashion-centric riposte to the more structured English tailoring and the more showy Italian style. Preppy, pinstriped, and red, white and blue, its clothes, for both men and women, were symbols of what became known as “Ivy League style.” It personified East Coast success in the Kennedy vein, and its Madison Avenue flagship, a limestone Italian Renaissance building, became a pit stop for commuters hopping the train from Grand Central to family life in the suburbs.
“It’s the most historical and storied men’s wear institution we’ve had in this country,” said Alan Flusser, a tailor and the author of numerous books on men’s style. However, he added, “for many years it has been more a memory than a reality in terms of its ability to influence or inspire people.”
The Times reported last month that Mr. Del Vecchio had hired PJ Solomon, the investment banking firm, as long ago as last year to explore “options” such as a sale or further investment. A restructuring plan was created before the pandemic, and this year, a group of potential investors valued the company between $300 million and $350 million. But Mr. Del Vecchio told The Times that he hadn’t felt that the discussions “matched the needs we saw.”
Mr. Del Vecchio also said that annual sales from 2017 through 2019 were effectively flat at about $1 billion, and that the company had debt of “less than” $300 million.
Union representatives at the Haverhill factory, which is Brooks Brothers’ largest in the United States, said the company denied requests on Tuesday for severance payments based on years of service and other benefits after the facility’s closure later this month, leaving the work force stunned. The Wednesday filing is another blow to the employees, as bankruptcy proceedings often leave little for workers.
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Updated July 7, 2020
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A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
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Human resources representatives from the company, who met with the union in person, said there wasn’t a severance clause in the Haverhill agreement, in contrast to those at its other two U.S. factories, according to Ethan Snow, chief of staff for the New England Joint Board, an affiliate of the UNITE HERE union, which represents more than 300,000 workers in North America.
“Just two months ago, they received all kinds of praise for their quick way of adapting the factories to make masks and how important it was to do American manufacturing during that time,” Mr. Snow said. “Suddenly, these workers don’t matter anymore.”
Mr. Snow said the company appeared open, though did not commit, to a proposal that would make computers available in the factory for workers, almost all of whom are immigrants, to “sign up for unemployment and navigate the state work force system,” he said.
A company representative declined to comment on the specifics on the dispute.
Brooks Brothers said in its Wednesday email that it expected to complete the sale “within the next few months,” and noted that it was “critical that any potential buyer aligns with our core values, culture and ambitions.” Otherwise, said Robert Burke, the founder of an eponymous consultancy, “this signifies the possible end of the first American brand specialized in men’s clothing.”
The company said it had secured $75 million in financing to help support it until it found a buyer. Names that have been discussed as potential buyers include the private equity firm Solitaire Partners, whose chairman, David Jackson, was briefly a contender to buy Barneys.
“The most important thing for a buyer would be having the capability to elevate the brand and reinvent the brands image for the future,” Mr. Burke said. “A big risk would be if the brand just competes on price or becomes a discount or outlet brand, which would be a real shame to see.”
