Rue21 Files for Bankruptcy, 540 Stores To Close

Rue21 has become the latest clothing retailer to file for bankruptcy, as the company files for Chapter 11 amidst nearly $200 million in debt.

Fox Business reports that the Warrendale, Pennsylvania, company’s Chapter 11 filing was the third time it had filed for such protections. This time, however, is different. Rue21 now plans to sell off all its inventory by implementing “going out of business” sales nationwide.

The trendy retailer, which was once a mall staple, will also shutter all 540 of its stores and offload all its intellectual assets.

The filing in the U.S. Bankruptcy Court in the District of Delaware showed that the store racked up $194.4 million in debt and couldn’t find a buyer to pay more than the company would make by liquidating its inventory. The company also cited the challenges of the COVID-19 pandemic, including the nationwide shift to online shopping and the subsequent underperformance of brick-and-mortar retail stores, as the reason for its increasing debt and subsequent Chapter 11 filing.

Rue21 first filed for Chapter 11 in 2003, and again in 2017. In the company’s second filing, they closed 400 stores and got rid of $700 million in debt. But these two bankruptcy filings weren’t enough to save the brand.

The teen clothing retailer is amongst the 58% jump in corporate bankruptcies since 2023. Perhaps most notably, Express filed for bankruptcy back in April.

Unlike Rue21, however, Express received a reprieve when it signed a nonbinding letter of intent with Simon Property Group, Brookfield Properties, WHP Global, and other parties. Analysts are hopeful about the future of the company thanks to WHP founder Yehuda Shmidman, the man behind the resurrection of Toys”R”Us and the partnership of Isaac Mizrahi with Target in the early 2000s.

Analysts, however, are cautioning that there will be more liquidations in the near future.

“The 58% spike in bankruptcies in 2023 signaled a major shift in lenders’ attitudes, unwilling to prolong support for struggling companies,” Catherine Corey, Debtwire’s global head of restructuring data, told Fox Business. “A convergence of challenges, including the post-pandemic withdrawal of government support, inflation, rising interest rates, supply chain disruptions, global unrest, and stricter lending requirements, created a perfect storm.”