Brooks Brothers, famous for its upscale pinstriped men’s suits worn by 40 of the 45 U.S. presidents and legions of executives since its 1818 founding in New York, filed for Chapter 11 bankruptcy protection, citing the impact of COVID-19 lockdowns as a major factor.
In an era of work from home, virtual meetings and lockdowns, demand for stylish clothes for the office and social occasions has fallen through the floor, impacting Brooks Brothers especially hard. Sales had already been declining as fashion trends evolved and business continued to migrate online.
A spokesperson told CNBC that the company’s leadership team had been consulting with advisors on strategic options for the past year, including a sale of the company, but the pandemic forced the issue. “During this strategic review, COVID-19 became immensely disruptive and took a toll on our business,” the spokesperson said.
As it seeks a buyer and winds through the bankruptcy process, Brooks Brothers has secured a $75 million debtor-in-possession loan from WHP Global, the Wall Street Journal reported, a firm which owns Anne Klein and Joseph Abboud.
Brooks Brothers is still in talks to find a buyer for the company, but many suitors don’t like the size of the store fleet, which numbers 500 doors globally. One such company was licensing firm Authentic Brands, according to CNBC. Brooks Brothers has relatively little debt compared to other retail bankruptcy filers, at $300 million. Its 2019 sales were about $1 billion, with ecommerce representing about a quarter of the total.
A decision had been made in April to close at least 51 of Brooks Brothers’ 250 North American stores, a process that has already begun, CNBC reported. It will also close its three U.S. factories by mid August.
According to the New York Times, Brooks Brothers said in an email it expected to complete a sale “within the next few months,” adding it was “critical that any potential buyer aligns with our core values, culture and ambitions.” It’s hard to imagine such an iconic brand not continuing in some fashion.
Brooks Brothers joins an unfortunate chain of iconic retail bankruptcy filings in 2020, including Neiman Marcus, JC Penney and J.Crew, with more sure to follow, including Ascena Group, parent of Ann Inc. and Lane Bryant.
Robert Passikoff, founder and president of consultancy Brand Keys, said there is a strong correlation between brands with high loyalty factors and their chances of avoiding bankruptcy in uncertain times. In his firm’s latest apparel loyalty top 20 rankings from May, Brooks Brothers placed 13th, while other recent bankruptcy filers were in the bottom tier: Neiman Marcus (14), Lucky Brands (15), J.Crew (17) and True Religion (18).
The top 10 were Nike, Ralph Lauren, Zara, Calvin Klein, Lacoste, Levi Strauss, Patagonia, Burberry, Chanel and Uniclo.
“You can blame the pandemic, sheltering in place, online meetings and sweatpants all you want,” said Passikoff. “Ultimately whether consumers support a brand and whether the brand can survive uncertain circumstances comes down to how much loyalty they engender. Being iconic, classic, well-made, even archetypically American won’t do it unless you have truly loyal customers.”