Dive Brief:

• New York & Co. owner RTW Retailwinds filed for Chapter 11 bankruptcy protection Monday after facing deep financial distress since the onset of the COVID-19 crisis.
• The apparel seller said in a press release that it plans to close "a significant portion, if not all" of its brick-and-mortar stores in bankruptcy.
• The company is also "evaluating any and all strategic alternatives," including a sale of its e-commerce business and related intellectual property.

Dive Insight:

The COVID-19 pandemic has brought financial strain throughout the retail universe, as stores were forced to close and customer spending on discretionary goods dropped. With coronavirus cases setting records in some of the most populous states in the U.S., the crisis is far from over. 

RTW, which also runs the Fashion to Figure, and Happy x Nature brands, is a case study of how the pandemic has cut deep for those retailers already in distress. 

RTW was closing stores and suffering revenue declines well before COVID-19 reached the U.S. As its revenue fell even more with the closures, the retailer went into default with landlords, vendors and its banker, Wells Fargo. In April, RTW's CEO-elect resigned abruptly, along with four of its board directors. 

The retailer disclosed in June that a bankruptcy was "probable," and later said it may have to close all of its stores. Making matters even more difficult, RTW entered a forbearance agreement with Wells Fargo requiring a multimillion dollar deposit in July and full loan repayment by the end of August, a tall order for a company facing a liquidity shortage and an apparel retail market still roiled with uncertainty.

"The combined effects of a challenging retail environment coupled with the impact of the Coronavirus (COVID-19) pandemic have caused significant financial distress on our business, and we expect it to continue to do so in the future," Sheamus Toal, RTW's CEO and CFO, said in the release. "As a result, we believe that a restructuring of our liabilities and a potential sale of the business or portions of the business is the best path forward to unlock value."

What happens next is an open question. Without a firm agreement for a sale or restructuring going into bankruptcy, the process could still go a number of directions. Retailers including Pier 1 and Stage Stores tried and failed to find buyers for their physical retail operations in bankruptcy. A sale of the company's e-commerce unit and IP may be better bets in this environment, with physical retail sales of apparel still hovering at depressed levels for the foreseeable future.