Papaya Clothing Files for Chapter 11 Bankruptcy, Aims to Stay in Business

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Teen apparel seller Papaya Clothing has filed for Chapter 11 bankruptcy protection, but aims to remain in business, according to multiple reports.

Papaya joins a list of mall-based chain stores such as American Apparel, Wet Seal, Sports Authority and PacSun that have gone bankrupt in the last year partially due to changing consumer buying habits and the loss of mall traffic.

The privately held California-based, 80-unit chain with about 1,300 employees, said in its filing that its financial difficulties came from competition from e-commerce and a poorly timed expansion, the Wall Street Journal reported.

(See how many other store closures have been announced in recent months: Infographic: Apparel Store Closures By Category)

Cornerstone Apparel Inc., the chain’s corporate name, brought in revenue of $134 million last year and, unlike the defunct chains, apparently doesn’t  have any secured debt, the publication said.

The company said in papers filed in U.S. Bankruptcy Court in Los Angeles that it will keep its doors open during its bankruptcy, but will decide which stores to keep, while also seeking rent concessions from landlords.

Opening its first outlet in 1999, Papaya added about 50 new stores in the last six years. The expansion took “a heavy financial toll” and significantly increased operating expenses, court papers said.

Papaya has a warehouse and distribution space in Commerce, Calif.


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