L’Occitane U.S. filed Chapter 11 bankruptcy protection in New Jersey on Tuesday, seeking to close stores.
The business cited declines in brick-and-mortar sales and the ongoing coronavirus pandemic as the reasons for the filing.
“Like most retailers in the United States, the debtor has been impacted by the COVID-19 pandemic, which has significantly limited retail operations throughout the country and suppressed consumer willingness to shop in person,” L’Occitane regional managing director Yann Tanini wrote in a declaration for the court.
“Even prior to the pandemic, the debtor was experiencing a decline in sales revenue from its brick-and-mortar boutiques, while its e-commerce revenue has dramatically increased,” Tanini said in court papers.
L’Occitane had already starting downsizing its real estate footprint, but wants to further reduce lease obligations due to the pandemic, the company said in court papers. The company hired Hilco Real Estate as a consultant to negotiate with landlords, but they have been reluctant, which prompted the bankruptcy filing. L’Occitane intends to reject 23 leases and “right-size its brick-and-mortar footprint,” it said.
The company is the U.S. subsidiary of L’Occitane Groupe SA which is publicly listed in Hong Kong and also owns Erborian, LimeLife and Elemis. U.S. operations account for about 9.1 percent of total company sales, the company said in court papers.
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The U.S. operations have 166 stores in 36 states and Puerto Rico, mostly in regional malls. Net sales have declined during COVID-19, the company said. Between April and December 2020, net sales dipped 21 percent year-over-year to $111 million. Brick-and-mortar sales made up 34 percent of that total, while e-commerce sales skyrocketed.
L’Occitane has about 1,051 U.S. employees, and furloughed and laid off certain workers during the pandemic. The company said that of 325 furloughed employees, 165 have come back, and 40 have been let go.
The company has $161 million in assets and almost $162 million in liabilities, per court papers. L’Occitane U.S.’s biggest unsecured creditor is its parent company, which is owed $26 million related to loans and $4.5 million related to inventory.
A hearing on L’Occitane’s first-day motions is scheduled for Jan 28. at 11:30 a.m.
Fox Rothschild LLP is representing L’Occitane.
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