US Fashion Retailer Scrambles to go Digital Amidst Bankruptcy Woes

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By Published On: June 18, 20180 Comments

US women’s fashion retailer, A’gaci, has successfully filed to exit its Chapter 11 bankruptcy, with plans to extend its e-commerce offerings.

After a poorly timed national store expansion scheme landed A’gaci in hot water, the company, which has been around since 1971, has been forced to close 20 stores and negotiate better rent for its remaining bricks-and-mortar locations.

According to the businesses original bankruptcy filings, the costs associated with opening 21 new stores over two years, increasing competition from e-commerce retailers, and the temporary closure of profitable stores in Texas, Florida and Puerto Rico left the company’s finances in a state of disrepair. The retailer’s chief financial officer also said that continued hiccups with the implementation of new business software also added to its woes.

The culmination of these issues led to a drop in earnings from $4.7 million in 2016 to negative $2.5 million in 2017, according to financial reports.

A New E-Commerce Focus

In a bid to avoid a repeat of its first fall from grace, A’gaci has renewed its commitment to online sales, as it scales back its physical store footprint.

The company is reportedly confident that it will be able to give its comparable e-commerce sales a boost, increasing by an estimated 35 percent in 2019 and a further 25 percent in 2020. As part of its bankruptcy plans, A’gaci also claims it can increase comparable in-store sales by five percent next year and a further three percent in 2020.

The US retailer will also be refining its online offering to cater to the needs of its large Hispanic customer base in the Southwest US and Puerto Rico. As such, plans are reportedly in place for the business to recruit a new digital marketing consultant, and to build a Spanish-language version of its e-commerce site.

To fund its re-emergence from bankruptcy, the company has reportedly received $12 million in exit financing, with a high interest rate of 10.5 percent.

“It’s fairly expensive financing, but you don’t get the cheap stuff when you’re a chapter 11 debtor,” Chief US Bankruptcy Judge, Ronald Kind, said at a hearing to approve the request.

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