Rue21 to Close 400 Locations

photo credit: Rue21.com

Teen retail takes another hit.

Rue21, which operates 1,194 stores in 48 states, announced that it will be closing 400 locations.

A statement on the store’s Facebook page read: “It’s true—we are closing some stores. It was a difficult but necessary decision.”

The chain had been the subject of rumors in recent weeks which had the company on the brink of bankruptcy. Sources close to the matter told Reuters the chain is carrying a $1 billion debt load from a $1.1 billion leveraged buyout by private equity firm Apax Partners in 2013, which it is struggling to repay.

“Rue21 has been working to improve its operations and enhance its liquidity position and has been actively engaged with its lenders and bondholders to explore the best path forward,” said Rue21 spokesperson Todd Fogarty in an email to the publication in early April.

The retail chain’s financial issues had been on the radar for months.

In September, Rue21 was listed by Fitch Ratings as one of seven retailers in high risk of defaulting within a year, citing consumers’ penchant for shopping online and preference for experiences over things. The author of the report said these shopping shifts are hitting stores like Rue21 particularly hard because teens are into electronics and hanging out with friends at restaurants but not shopping, according to Bloomberg. The report also said stores like Rue21 have little reason to exist, given that they offer product that can be found elsewhere.

In October, the company was still touting plans to grow its retail bases with an additional 40 stores slated to open in fiscal 2016. At the time, the company also committed to strengthening its e-commerce sales, which grew by 90 percent in the first six months of the fiscal year.

Rue21’s troubles follow the closely chronicled toppling of mall-based stores, including Wet Seal, The Limited and Aeropostale, the latter of which is re-emerging after a bankruptcy sale.

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