Rue21 Files for Bankruptcy, Closing All Washington Stores

Rue21 files for Chapter 11 bankruptcy, citing $200 million in debt and a shift to online shopping, and will shut down all its stores in Washington state and eventually across the US. The company will liquidate its assets, affecting 4,900 employees, and sell its brand and intellectual property.

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Rue21 Files for Bankruptcy, Closing All Washington Stores

Rue21 Files for Bankruptcy, Closing All Washington Stores

Rue21, a prominent mall retailer, has filed forChapter 11 bankruptcyprotection for the third time in two decades, citing $200 million in debt and a shift to online shopping. As a result, the company will shut down all its stores in Washington state and eventually across the US, affecting 4,900 employees.

Why this matters: The bankruptcy of Rue21 highlights the ongoing struggle of brick-and-mortar retailers to compete withonline shopping, which could have significant implications for the retail industry as a whole. This trend could lead to further job losses and store closures, ultimately changing the face of American shopping centers.

The company, which has assets and liabilities between $100 million and $500 million, attributed its downfall to "adverse market trends, including a shift from traditional brick-and-mortar retailers to online retailers and changing consumer preferences," according to interim CEO Michele Pascoe. Rue21's primary demographic is "adolescents and young adults" with an average household income of around $50,000, who prioritize value-priced purchases.

Liquidation sales have begun at Rue21 locations across the country and will continue for the next six weeks. The company plans to sell its brand and intellectual property. In Washington state, all Rue21 stores will be closed, starting with the South Hill Mall location in Puyallup. "It's unfortunate but that company has been having a rough time for the past few years," said Joe Bell, a spokesperson for the South Hill Mall. "Our leasing executives are already engaging with other business owners who might be eager to set up shop at the mall," Bell added.

The Roseburg location in Oregon is one of the 540 stores set to shut down. Payton Pierce, the store's assistant manager, said that the sales started the next day after the bankruptcy announcement, with no heads-up. Staff were not fully convinced that issues were arising, as every store in their district was having the same problems, and the company had recently renewed its lease in Roseburg. Pierce noted that staff losing their jobs on short notice is "rough" but "everything happens for a reason."

The closing process is expected to take four weeks, with any leftover product being loaded onto trucks and taken out to liquidate at the end of the four weeks. The company has not provided clear information to staff about the closing process, with Pierce stating, "We're trying to contact people and there's no one to talk to." Rue21's website has been unavailable since the bankruptcy announcement, displaying a message stating, "Our site is being updated" and "Check back soon."

Rue21, which opened in 1970, peaked at 1,200 locations before its current financial struggles. The retailer operates 541 stores across 45 states, with 10 locations in Oregon. The exact dates of each store closure remain unclear as the company navigates thebankruptcy process. Chapter 11 bankruptcy allows a company to restructure and remain open, while Chapter 7 bankruptcy sells all of a company's assets, putting it out of business.