Clothestime’s Creditors File Bankruptcy Petition
Less than six years after emerging from bankruptcy protection, Clothestime Stores Inc., the Anaheim-based discount apparel chain, is being forced back into U.S. Bankruptcy Court.
Three Los Angeles-area apparel manufacturers that say they are owed more than $700,000 in missed payments filed an involuntary bankruptcy petition Friday against the retailer, which sells mostly juniors apparel and accessories.
“There was no hope that they were going to get paid,” said Richard Marshack, a Foothill Ranch-based bankruptcy lawyer representing the three companies. “What we want to do is force the sale of the company. We know that there are suitors out there.”
The privately held apparel chain is owned by JM Associates of New York. Representatives of JM Associates could not be reached, and Clothestime executives in Anaheim did not return numerous phone calls for comment.
The company posted revenue of $150 million in 2002, according to Women’s Wear Daily.
In the last several months, Clothestime has missed payments totaling $704,194.50 to Ms. Bubbles Inc., Rigo International Inc. and Big Six Fashion Inc. -- apparel manufacturers that supply merchandise to the retailer, Marshack said.
In addition, Clothestime, which operates 230 stores in 19 states -- including about 90 in California, apparently is behind on employee paychecks and rent payments for a number of its stores, Marshack said.
An employee at a Burbank store said Monday that the store was closed for a week but did not give a reason.
Teen apparel is one of the hottest sectors of the retail market, yet Clothestime has struggled to distinguish itself. Young shoppers have been flocking to trendy specialty stores, such as Hot Topic, Pacific Sunwear and American Eagle Outfitters, which are based mostly in malls. Clothestime stores, however, tend to be located in strip shopping centers.
“The biggest problem ... was it tried to cater to the teen customers in strip centers,” said Liz Pierce, a retail analyst with Sanders Morris Harris. “It isn’t effective because teen girls want to go to malls as a social thing. Going to strip malls doesn’t provide the same ambience.”
Clothestime originated in a booth at an Orange County swap meet during the 1970s. The retailer grew into a chain, gaining popularity in the 1980s as its inexpensive but fashionable clothes attracted value-conscious young women.
But sales slipped in the 1990s as customers sought name brands at low prices at national chains, and specialty retailers began grabbing market share.
Clothestime, which once traded on Nasdaq, filed for bankruptcy protection in late 1995 and emerged two years later with its common stock and other equity securities canceled under its Chapter 11 reorganization plan.
In the latest proceedings, Clothestime has 20 days to answer the involuntary bankruptcy petition, Marshack said.
Meanwhile, in a separate action filed last week, a Los Angeles-based apparel manufacturer filed a lawsuit against Clothestime, seeking to collect $51,794 in missed payments, said Koorosh Banayan, a lawyer representing Golshan Inc.
