US men’s wear retailer Brooks Brothers has become the latest company to file for bankruptcy protection after being hit by falling sales and declining demand for its business attire.
The 200-year-old New York based company today (8 July) said it had filed for Chapter 11 bankruptcy protection “to manage what has been an incredibly challenging period for all industries, especially retail, during the Covid-19 pandemic.
It has also announced a sale process to try to find a new owner. The privately held company is also in the process of shuttering 51 of its 250 US stores.
The bankruptcy is the latest retail casualty of the pandemic, and follows the likes of JC Penney, Neiman Marcus and J.Crew.
Out of step
According to Neil Saunders, managing director of GlobalData Retail, unlike many failing retailers, Brooks Brothers has a brand that is steeped in history and which remains well regarded by consumers. From a financial perspective, the business is sound and has avoided the excessive debt burdens of its distressed peers.
“However, neither of these things has shielded it from the harsh realities of modern retailing and, more recently, the shifts in consumer demand brought about by the coronavirus,” he notes.
“Although the pandemic has severely eroded the outlook for the business, Brooks Brothers has long suffered from a failure to decisively adapt to changing trends. The brand remains well regarded in terms of quality and design and the current leadership deserve credit for rebuilding these attributes.
“However, when it comes to tastes and style, Brooks Brothers has been swimming against the tide. Its formal, old-school approach found favour among mature and more traditional demographics, but it has become increasingly out of step with a new generation of consumers who are looking for a more edgy approach to smart casual.
“They increasingly found it in niche brands like Kiel James Patrick or more mainstream players such as Vineyard Vines and even J.Crew. This dynamic, along with the increased casualisation of workwear – which has seen a shift away from suits and ties – has made it increasingly difficult for Brooks Brothers to drive growth.
“A review of the business was already underway, and this included options for repositioning the brand. However, the pandemic has disrupted this process and sharpened many of the underlying trends Brooks Brothers was already struggling to adapt to.”
According to GlobalData figures, year-over-year sales of men’s formal clothing fell by 74% during April, May and June, while men’s smart casual apparel sales dipped by 62% over the same period.
“While this deterioration will ease over time, demand will remain suppressed for the rest of 2020 and well into 2021 as office working, business meetings, and socialising are all reduced,” Saunders adds. “This leaves Brooks Brothers very exposed to a depressed market.
“Against this backdrop the business will become increasingly unsustainable. There are many expensive city-based stores that, because of demand shifts and because of an emptying out of the workforce from urban locations, will no longer work economically. There are some factory outlet locations that will also suffer reduced demand due to much lower levels of footfall.
“These property problems can most efficiently be resolved through a bankruptcy process. If successful, this will streamline the business and get it into a state that is more attractive to a potential buyer.
“In our view, there will be no shortage of interest in Brooks Brothers. The brand has a solid foundation on which a new owner can build, and it has a good digital business that has the potential for future growth. However, the process of reinvention will not be easy; it will take time, capital and effort to reconfigure Brooks Brothers into a retailer ready to serve the needs of modern consumers.”