BANKRUPTCIES: StyleSite files Chapter 11

Diplomat Direct Marketing bit off more than it could ultimately chew when it bought bankrupt women’s apparel cataloger Brownstone Studio in 1997, and followed that purchase a few months later with the acquisition of women’s apparel cataloger Lew Magram. Nearly three years later, Brownstone’s continued sales decline and Magram’s lack of credit (which delayed the delivery of merchandise) have proved too much for the company.

On Jan. 13, after its primary bank lender, First Source LLP, chose not to provide further funding, the $74.6 million Diplomat (which had changed its name to StyleSite Marketing in August 1999) filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York.

Attorney Neil Siegel, who is representing Teaneck, NJ-based StyleSite, told Catalog Age on Jan. 19 that the firm was “in the beginning of dealing with a multitude of financing issues.” Also at that time, StyleSite CEO Warren Golden said that his company was operating with enough cash for a six-week period. If the company could not get financing for a reorganization from its lender, he said, “we will have to explore the possibility of selling the business.” (StyleSite is no longer mailing catalogs and is only fulfilling backorders.)

For the nine months ended June 30, StyleSite sales were $56.4 million, down 1% from $57 million for the same period of the previous year. More troubling, the company reported a loss of $22.3 million for the nine months ended June 30, compared to a loss of just $199,387 one year prior. And circulation had dropped from 14 million in the third quarter of 1998 to 8 million for the third quarter of ’99.

In a December interview with Catalog Age, Golden had admitted that the company had cut circulation because of “some financial constraints. But per catalog mailed, [holiday] response was better than last year,” he said. At the time, according to Golden, StyleSite was “in the process of refinancing.”

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