Diesel USA files Chapter 11

  • Diesel USA on Tuesday filed for Chapter 11 protection in the U.S. Bankruptcy Court in Delaware, according to court documents.

  • The jeans retailer attributed the filing to a decrease in wholesale orders, a "general downturn in the brick-and-mortar retail industry," expensive long-term leases, a decrease in net sales and multiple instances of theft and fraud, according to supplemental court documents.

  • The company's reorganization plan includes relocating specific stores to locations with a smaller footprint, opening a temporary pop-up concept in Miami, launching new stores in strategic locations and a rebranding effort. It will also not pursue the renewal of leases for a number of underperforming locations, according to the documents.

A combination of factors led to Diesel USA's Chapter 11 filing. The denim company cited "economic challenges" and multiple incidents of theft, including the disappearance of over $900,000 in cash from one of its stores between 2016 to 2018.

The bigger concern was operating losses, which went from $4 million in 2014 to $27 million in 2015, and continued on a downward trajectory.

Additionally, in 2014, Diesel USA's full-price stores and factory outlet locations together generated $125 million in sales, but by 2018 those sales had decreased for a total of $72.5 million.

Diesel USA was launched in the U.S. in 1995 and is a subsidiary of its parent company, Diesel S.p.A., which was founded in Italy in 1978. Diesel USA currently operates 28 retail locations in 11 states. The company also has partnerships with more than 200 specialty retailers, boutiques and additional locations through which its apparel is sold including Bloomingdales, Nordstrom Rack and Saks Fifth Avenue.

The Chapter 11 filing is one of many in the early months of 2019 that also include the bankruptcy of Payless ShoeSource, Things Remembered, Gymboree, Shopko and Charlotte Russe, among others.

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