Judy’s Files for Protection Under Chapter 11 : * Retailing: The apparel chain’s parent had said it was negotiating a sale, but the company ran out of cash before a deal was struck.
Judy’s Inc., a Van Nuys-based operator of 94 apparel stores in the western United States, has filed for reorganization under federal bankruptcy laws, Judy’s president said Thursday.
The privately held company thus becomes the latest casualty in retailing, where the recession--combined with excessive debt burdens in some cases--has forced such giant chains as R. H. Macy & Co. to seek protection from their creditors. Even before it went private in 1989, Judy’s had struggled from competition with such successful chains as Gap Inc., Cherokee and Limited Inc.
Judy’s had operated more than 100 outlets but immediately closed nine stores after filing under Chapter 11 of the bankruptcy laws on Monday in Los Angeles, President Alan W. Reed said. The closures resulted in 24 workers being laid off, lowering Judy’s overall employment to 862 people, he added.
The company now operates 61 Judy’s, which sell trendy, moderately priced women’s wear, and 33 GHq outlets for men’s apparel. No additional store closings are planned, but Judy’s is evaluating whether additional stores need to be shuttered, he said.
Reed had said last month that Laws International Holdings Ltd., a Hong Kong textile and clothing concern that owns 80% of Judy’s, was negotiating the retailer’s possible sale with four potential buyers. But Judy’s, which has annual sales of $50 million to $75 million, ran out of cash before any deal was struck, said Reed, who owns the remaining 20% of the chain.
Judy’s listed its assets at $21 million to $25 million, but it has not tallied its total debts, said Richard L. Wynne, a lawyer handling the company’s reorganization. (Under Chapter 11, a company keeps operating but is shielded from creditors’ claims while it works out a plan to pay its bills.)
However, Wynne said, the debts include about $1.5 million owed to Judy’s clothing suppliers. Although those debts are frozen by the Chapter 11 petition, Reed said, “the response I’ve been getting (from suppliers) is positive” in terms of future shipments.
One of the largest unsecured creditors listed in the filing is Judy Knapp, a Los Angeles apparel maker that’s owed $69,319. Wynne said other creditors include Hong Kong & Shanghai Bank, which provided Judy’s with a line of credit and which holds the deed on Judy’s headquarters building. The total amount owed the bank is not known, he said.
Another creditor is Marcia Israel, the founder of the 46-year-old chain, who sold the company three years ago. She’s owed about $600,000, apparently as part of her consulting agreement with the company, Wynne said.
Israel started Judy’s in 1946 and, with her husband, Lawrence, owned 78% of the company when it was sold to Laws for $31 million in 1989. (Public shareholders then owned the rest.) She also was Judy’s chief executive until the sale, but remained a consultant.
