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The growing list of clothing retailers filing for Chapter 11

The clothing industry is steady in some ways and very unsteady in others. On one hand, everyone needs clothes, which would suggest that demand is steady. But the specific kinds of clothes that consumers want to wear are dictated by fashion, which is capricious and ever-changing.

In recent years, several well-known clothing retailers have filed for bankruptcy as their fortunes have changed. The most recent company to do so is Pacific Sunwear (PacSun), which announced plans to stay open under new ownership after completing Chapter 11 bankruptcy proceedings.

The problems plaguing PacSun are common in the clothing industry. They include:

  • Staying relevant with one particular fashion aesthetic when fashion trends continue to change
  • Competing with "fast-fashion" retailers, which can produce and sell trendy clothing very quickly and inexpensively
  • Paying costs related to brick-and-mortar stores when consumers are increasingly shopping online
  • Growing too quickly after enjoying early success

To be sure, these types of problems are not a sign of poor management or a bad business model. Rather, they reflect a changing marketplace and fierce competition. As such, there are many who believe that PacSun can become profitable again with the help of Chapter 11 bankruptcy and investment from a private equity firm.

If your business is struggling with overwhelming debt and too little revenue, you may just be the victim of unforeseen market circumstances. If you still believe in your business and its ability to succeed, it might be beneficial to speak with an experienced bankruptcy attorney about filing for Chapter 11.

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