Dive Brief:
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Women’s apparel retailer Soft Surroundings last week filed for Chapter 11 bankruptcy in the Southern District of Texas’s Houston Division. The company will close all 44 stores, according to court documents.
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Rival Coldwater Creek is buying the company’s remaining assets and will continue to sell the brand’s apparel and accessories online and via catalogs, according to a press release and court documents.
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Soft Surroundings has about 646 employees. Some 450 work at its retail stores, 140 at its headquarters, 15 at its call center and 50 at its former distribution center in Mexico, Missouri. The company has secured $18 million in debtor-in-possession financing from liquidation consultancy Gordon Brothers to enable business continuity.
Dive Insight:
Soft Surroundings never had a large footprint, though its locations, found in 24 states, span the country.
Early in the pandemic, the company was running 80 stores. Court documents show the retailer struggled to recover from lost sales and market changes during and after the height of the disease outbreak. Excess inventory from stores that ended up being permanently closed spurred promotional prices that hurt margins, and the retailer’s liquidity steadily eroded.
The company shuttered 25 stores last year, per court documents. Now they will all disappear, as Coldwater Creek aims to turn the specialty retailer into an online-based DTC brand. E-commerce has provided the bulk of the business, generating $141.6 million in sales last year, or 65.4% of overall sales, per court documents.
The St. Louis-based brand will continue its catalogs as well, sticking with its roots. The retailer mailed out its first catalog in 1999, and opened its first store, in its hometown, six years later. Recently, however, the company has fallen on hard times, and spent the last several months scrambling to shore up its finances, according to a statement from Executive Chair Bridgit Lombard.
"Over the past year, we have taken significant steps to fortify our financial standing including rightsizing our business to better match current market conditions,” she said.
The brand may have encountered rising competition during and after the pandemic, as almost every other apparel retailer also began touting the kind of softness in fabrics that has been its signature. Since then, after an initial post-shutdown refresh of closets, it’s the sales of apparel that have softened. Squeezed by inflation and other financial pressures, consumers have turned to off-price stores and promotional events in a quest for good deals.
In court documents, the company’s restructuring officer, Curt Kroll, cited “macroeconomic conditions and high fixed costs that impacted the company’s margins over the last several years.”
“Shifts in the competitive landscape, a move towards online channels, the COVID-19 pandemic, and increased costs of goods and services due to inflation, among other factors all impacted the Company’s financial position,” Kroll said.
