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Wet Seal – considering bankruptcy yet again?

After failing to turn around the business, Wet Seal’s owner is considering to bid farewell to the teen apparel retailer. Versa Capital Management is said to be exploring either taking the company bankrupt or sell it.

Wet Seal LLC is exploring liquidation or a sale, according to news reports cited by the ‘Orange County Business Journal’. Sources familiar with the ongoing situation at the retailer told ‘The Wall Street Journal’. Versa is “considering a number of options for the retailer,” including a “sale for either the retailer as a whole or just its online presence,”

The firm is considering solely operating as an online retailer

“The firm is also considering liquidating all of its stores and solely operating as an online retailer,” the same sources added.

The final decision about the mall retailer’s future is said to be decided in the coming days, as the private fund is keen on to selling the retailer as it keeps struggling; even after the first bankruptcy. Sources close to the matter quoted by Reuters point out that the company would prefer an out-of-court deal.

It’s worth recalling that if Wet Seal decides on a bankruptcy over a sale, it would be the second in two years for the chain. The Irvine-based women’s apparel retailer closed 338 under performing locations and laid off 3,695 full- and part-time employees in January 2015, just before filing for Chapter 11 bankruptcy.

Months later, the fashion chain emerged under the ownership of Philadelphia-based private equity firm Versa Capital Management LLC, with a pared-down lineup of 171 stores in 41 states.After Versa took over, Melanie Cox was named chief executive, and Judd Tirnauer last year assumed the role of chief financial officer.

A bankruptcy would mark the second in two years for Wet Seal, and in its previous filing, it had sold assets to Versa in an agreement that also gave the firm 7.5 million dollars in cash. As reported by ‘PYMNTS.com’, that deal was struck after Versa’s Mador Lending gave Wet Seal 20 million dollars in replacement bankruptcy funding and assumed a number of liabilities.

Trump’s tax on intern

On a related note, the border adjustment tax, a key element in Trump’s plan for tax reform, could mean more bad news for apparel retailers. Although the proposal would cut the corporate tax rate and let multinational firms repatriate foreign profits, the “border-adjusted” clause would tax imported goods substantially higher than they are now.

Brian McGough, an analyst at Hedgeye Risk Management LLC, said in a recent report that speciality apparel makers are “most at risk” given their reliance on imported merchandise. Under the tax plan, apparel prices could rise as much as 15 percent. “Many of these retailers are hanging on by a thread and any tax that increases the cost of their imported goods or materials will make them even less competitive and attractive to consumers, reducing already pressured revenues and making debt repayment even more difficult,” says Rosenthal.

Any tax that would increase retailers’ cost will be bad news for an industry that has already seen a number of bankruptcies and closings, concurred bankruptcy lawyer Michael A. Rosenthal, informs the ‘WSJ’.

Image:Wet Seal

Claire’s withdraw its IPO plans without further notice

Earlier this week the fashion accessories brand explained that it would pull its planned initial public offering of shares or IPO, which it originally filed in May 2013. The cancelation of its floating plans marks the latest setback for the speciality retailer.

The Apollo Global Management-backed company planned to raise 100 million dollars, according to filings with the U.S. Securities and Exchange Commission from 2013.

‘Law360’ highlights that this 100 million dollars value is typically used as a placeholder when companies first file documents with the regulator.

Claire’s gives up on initial public offering and saves the fee for the future

It’s worth recalling that the company’s current owner took the specialty retailer private in March 2007, in a deal valued at 3.1 billion dollars. Since then, Claire’s has had some financial setbacks, including a missed interest payment on some of its debt. The company ultimately made the payment, after a delay, according to a September statement.

In addition, the company was forced to refinance some of its credit facilities in order to avoid a default, reports the LexisNexis publication.

In a filing to the market regulator, the accessories company “hereby applies to the Securities and Exchange Commission (the “Commission”), pursuant to Rule 477 under the Securities Act of 1933, as amended (the “Securities Act”), for the withdrawal of the Company’s Registration Statement on Form S-1 (File No. 333-188359) filed with the Commission on May 3, 2013, including all amendments and exhibits thereto (the “Registration Statement”). The Company is seeking withdrawal of the Registration Statement because it has decided not to proceed with the offering at this time”.

”The Registration Statement has not been declared effective, and no securities of the Company have been sold pursuant to the Registration Statement. In accordance with Rule 457(p) under the Securities Act, the Company requests that all fees paid to the Commission in connection with the filing of the Registration Statement be credited for future use”.

Although the Tuesday’s filing did not provide an explanation for the pulled IPO, but the company did request that the fees be credited for future use.

Image:Claire

Would Inditex’s Lefties take on H&M and Primark in 2017?

Lefties - the lesser known and advertised sister-brand of Zara from the famed Inditex stable is ready to go head to head with popular fast-fashion brands like H&M and Primark in the New Year. Founded in Spain in an outlet format, today the brand operates approximately 134 stores. Now Lefties is getting ready for global expansion as last December the company moved out of Europe to launch its first store at Doha Mall in Qatar.

Lefties takes a front-seat among Inditex brands

The move follows on from last November, when Lefties refurbished its logo, stores as well as its online platform to change the way it appealed to the customers earlier. While the revamped website does not offer online shopping option, one can book a product online and pick it from the Lefties store in Spain. The look of its new website is quite similar to Zara. The web pages display a large selection of products from coats, denims, oversized tops, slip dresses, sportswear to shoes and accessories like glasses, belts and fashion jewellery. And like Zara, it has even published trend-based editorials like ‘Modern Countryside’ and the ‘New Athleisure’.

Would Inditex’s Lefties take on H&M and Primark in 2017?

What was once considered a discount post-recession pop-up shop is now emerging as the most successful brand under the Inditex portfolio. The company has also said to have hired designers, pattern makers and merchandisers to infuse new life into the products retailed under this brand.

While the parent company has not revealed any definite plans or numbers for Lefties, a report from Reuters notes that it is quietly working on strengthening the brand’s product portfolio and reach. Lefties, literally originated from the phrase 'left over' is gradually gathering momentum as an independent brand, now having its own separate clothing lines for men, women and children apart from denim and sportswear. Originally launched in 1993, as a brand selling Zara's last-season rejects at low costs, Lefties has emerged as one of the most promising name under the Inditex umbrella.

Lefties ended 2015 with a turnover of 162.1 million euros (172 million dollars), 22 percent more than in the previous year with net income of 1.8 million euros (1.9 million dollars) against losses of 0.4 million euros (0.43 million dollars) the company reported in the previous year.

Lefties set to expand international presence

The company may not have immediate plans to bring the brand to USA, after expanding its presence in Mexico, Portugal, and Russia apart from its home-country Spain. But Inditex is taking all the right steps to make Lefties available across the globe posing tough competition for rivals in the same price category.

Harper’s Bazaar UK predicts that Inditex may open more Lefties stores in the international markets this year, posing competition for brands like Primark, Forever 21 and H&M. Only hitch to its buoyant expansion plans could be absence of an ecommerce platform in today’s day and age, since the current layout does not let the customers shop online, and its current brick-and-mortar stores are only available in Spain, Mexico, Russia, Portugal and Qatar.

Would Inditex’s Lefties take on H&M and Primark in 2017?

However, this scenario may change soon. In 2014, Carlos Hernandez from retail consultancy Planet Retail had told Reuters that Inditex has every incentive to treat Lefties as a separate format - and roll it out abroad too and they could export the brand to other countries where Inditex has a large presence like the UK and Germany since Spain is not the only country where the crisis has taken its toll.

Lefties emerges as an independent label

Post 2008 recession, Lefties was definitely not a sought after label in Mexico or Spain with customers preferring to shop at outlets if other brands of the Inditex Group like Zara, Bershka or Massimo Dutti. And the Lefties stores also faced direct competition from Zara’s rivals Primark and H&M.

However, sales in 2015 showcased how this low-cost label has managed to shed its image as a leftover brand, by succeeding amid sluggish economy with its own collections. And it has opened new opportunities for the brand. The Group may now look at investing in expanding Lefties’ footprint in Mexico and Spain as well. In fact, citing rising demand, Inditex has already curtailed the number of Zara stores to focus on Lefties in Spain. In addition customers who have moved away from Zara to cheaper styles of H&M and Primark post the economic crisis are now taking a note of fresh looks and affordable under 100 dollars merchandise offered by Lefties.

Photos: Lefties SS17 campaign

YSL sits out Paris Men's Fashion Week as Ackermann steps up

Paris men's fashion week starts Wednesday without two of its perennial star brands but with Colombian designer Haider Ackermann joining the big league with two hotly anticipated shows. Ackermann will put his own bohemian line on the catwalk Wednesday night and follow it up two days later with his debut show for the Italian luxury brand Berluti.

The 45-year-old Paris-based creator is the latest in a long line of stellar designers to have passed through the doors of the Royal Academy of Fine Arts in Antwerp, following the likes of Dries Van Noten and Martin Margiela. Berluti, which is best known for its 1,000 dollar-plus shoes, launched its own menswear line in 2011, five years after being bought by the French luxury goods and fashion group LVMH.

YSL sits out Paris Men's Fashion Week as Ackermann steps up

Haider Ackermann to show at Paris Men's Fashion Week

But while all eyes will be on Ackermann, Paris mainstays Yves Saint Laurent and Carven will be notable by their absence. While Carven have suspended their men's line, the reasons for Yves Saint Laurent's absence are more mysterious. Its new Belgian-born designer Anthony Vaccarello made a typically sexy splash with his first women's collection in September, having taken over from Hedi Slimane, who held last year's menswear show in his adopted home of Los Angeles.

But Yves Saint Laurent were not forthcoming on why there would be no autumn-winter Paris show this year. "We have no reason to give you," a spokeswoman told AFP. With decades-old fashion show conventions in flux over the last few years, the trend for mixed shows with men and women sashaying down the runway together seems to be getting stronger.

Having emerged last year in Paris and become more marked in the men's shows in London and Milan earlier this month, Paul Smith, Julien David and Kenzo will present collections in Paris for both genders at the same time. Within the fashion world this mixing of men's and women's shows has been dubbed "co-ed" -- a play on the "coeducational" term used for mixed schools.

For the most part, however, this does not mean that the clothes being presented are unisex, although the queen of British punk style Vivienne Westwood has urged couples to share their wardrobes. The 75-year-old icon said sharing clothes was as much about saving the planet and money as daring men to wear dresses. "You've seen women for 100 years in trousers but it's all switched around equally now," Westwood told AFP after her London show. (AFP)

Photo 1: By Aveda Corporation - Haider Ackermann backstage at Paris Fashion Week Fall Winter Collection 2015., CC BY 2.0

Photo 2: Haider Ackermann, Vimeo

Hugo Boss sees FY16 operating profit at high end of guidance

Hugo Boss in its preliminary trading update has said that Group sales and profits improved in the fourth quarter and the company made progress in its own retail business in particular. As a result, Hugo Boss now expects operating profit in the full year of 2016 to reach the upper end of the forecast range. In the fourth quarter, Group sales declined by 1 percent on a preliminary basis and adjusted for currency effects. In euro terms, revenues amounted to 725 million euros (769 million dollars), a decline of 3 percent compared to the prior year.

“Fourth quarter results underline that we are on the right track”, says Mark Langer, CEO of Hugo Boss, in a statement, adding, “In China, we completed the turnaround in the second half of the year. In Europe, we held up well in a difficult market environment. We will continue to work intensively on implementing our strategic plans presented in November. We are confident that this will enable us to return to sustainable profitable growth.”

Update on the fourth quarter results

Hugo Boss said, in Europe, sales increased 2 percent on a currency-adjusted basis mainly due to robust growth in the UK. Revenues in Germany were up, too. In the Americas, sales were down 14 percent in local currencies, however, the Asian business was 5 percent above the prior level. In Mainland China, the company achieved comp store sales increases of close to 20 percent adjusted for currency effects.

Sales in the company’s own retail business including online and outlets improved by 4 percent on a currency-adjusted basis but on a comparable store basis, revenues decreased by 3 percent. Sales in the wholesale business were 13 percent below the prior year level in local currencies.

Preliminary full year sales down 4 percent

On a preliminary, non-audited basis, Group sales in the full year amounted to 2,693 million euros (2,857 million dollars), a decline of 4 percent compared to the prior year. On a currency-adjusted basis, the decrease was 2 percent.

The company said, subject to the completion of year-end closing procedures, the Group expects that operating profit (adjusted EBITDA before special items) will reach the upper end of the forecast range. Hugo Boss had confirmed its outlook of a profit decline between 17 percent and 23 percent.

Picture:Hugo Boss

To be creative or not? That’s the question for luxury handbag-makers

The economic slowdown in China; terror attacks in main international luxury plazas such as Paris and the fights against counterfeits have taken a toll on handbag-makers’ creativity.

According to a recent research by Edited, a fashion analysis firm, Michael Kors Holdings Ltd., Prada SpA, LVMH's Louis Vuitton and Burberry Group PLC all reduced the number of styles introduced last quarter.

In the final three months of 2016, the number of new styles introduced by Michael Kors dropped 24 percent from the preceding quarter. Prada and Louis Vuitton rolled out 35 percent fewer new designs, while the number at Burberry dropped 8 percent, according to Edited, whose clients include Ralph Lauren Corp. and luxury e-commerce retailer Net-A-Porter.

On the other hand, a few brands such as Kate Spade & Co. and Ralph Lauren, did introduce more new designs in the fourth quarter, Edited found.

Brands needs their bags sales, which account on average for 40-60 percent of total sales

"There's a feeling of doom out there in the industry - everything is defensive and not offensive," said Milton Pedraza, a luxury consultant who runs the Luxury Institute. "What you're seeing is a tremendous amount of copying, less innovation and less creativity, at a time when exactly what you need is to be bold."

And truth is that luxury brands need their bag sales. Bags account for 39 percent of Gucci’s products priced over $1,000. They make up 65 percent of Fendi’s and 82 percent of Prada’s 1,000 dollars or more assortment, reports Edited in their corporate blog.

"Dropping newness too low could certainly threaten sales," said Katie Smith, a senior fashion analyst at Edited. In fact, rolling out the right number of styles is no easy task. Smith stresses that brands need to strike a careful balance between creating an excess of inventory while ensuring they remain trendy and therefore relevant.

Handbag-makers have faced other challenges as well. Younger consumers are demanding faster availability of the latest trends, and some are showing preference for shoes and jewelry over bags.

Sales growth in handbags is estimated to decelerate to 3.1 percent by 2020, from 16 percent in 2012, according to data collated by Euromonitor. The slowdown has forced companies to diversify. Michael Kors is expanding into menswear, and Kate Spade is growing in other categories such as home goods.

In this regard, Pedraza recalls that "For the first time in many years, there's a real sense of threat," he said. Companies are focused "on survival and dismantling the old structure."

Photo: Louis Vuitton Official Web

Doubled investment won’t save The Limited’s stores from closure

ANALYSISThe Limited Stores LLC owner, Sun Capital Partners Inc, disclosed earlier in January on Friday it has almost doubled its investment in the struggling U.S. womenswear chain. However, the retailer will go ahead with its recently announced plans to shut all of its 250 The Limited stores.

As reported by Reuters, Sun Capital Partners told investors in a letter that it has made 1.8 times its 50 million dollars investment in Limited Stores, thanks to prior distributions and dividends. In fact, the letter continues, Sun Capital is writing down the remaining equity value of Limited Stores to zero.

"We have worked very hard and made significant investments over nine years to improve operations and create a sustainable business at The Limited," Sun Capital told Reuters in an emailed statement.

In the letter to investors, Sun Capital said Limited Stores is evaluating strategic alternatives for the company's remaining e-commerce business and intellectual property.

The Limited, first fashion retailer shutting down in 2017

Despite the private fund’s funding, Limited Stores said on Friday that it would close all its brick-and-mortar retail locations effective Sunday.

This series of closures will put 4,000 employments at stake, according to people familiar with the company's plans quoted by Reuters.

"In an increasingly challenging environment for mall-based retail and women's apparel, we are very disappointed that the company has had to make the difficult decision to close its retail locations," Sun Capital said regarding the retailer’s network closing.

It’s worth recalling how Sun Capital acquired a majority stake in Limited Stores in 2007 and bought the rest of the company in 2010. The return on investment for Sun Capital has been "an unusually happy ending for the private equity firm," explained Erik Gordon, a professor at the University of Michigan Ross School of Business. Gordon further added that the nine-year period during which Sun Capital was an investor in Limited Stores was a "little on the long end."

The Limited was the first foray into the fashion world of Leslie H. “Les” Wexner, who founded the fashion chain in 1963. The first store was a 2,000-square-foot box named for its limited assortment of women’s apparel. The ‘Washington Post’ calls out how the business thrived quickly, encouraging Wexner to open fancier womenswear brand Express, and Structure, a men’s shop.

Wexner’s company is today’s L Brands, parent group to Bath & Body Works and Victoria’s Secret.

Image:The Limited Web

Jack Ma's million jobs pledge more PR than promise

Alibaba founder Jack Ma and Donald Trump made headlines with the Chinese entrepreneur's attention-grabbing pledge to create one million US jobs, but analysts say the move is more about generating good PR than substance.

The splashy promise from Trump Tower was a strategic decision by Ma to win goodwill from the next US president and hedge against political risks to Alibaba's vast online shopping business over counterfeits, independent e-commerce analyst Li Chengdong told AFP.

On the short term, economists are sceptical as such a figure would represent almost one percent of all jobs in the United States, making the firm one of the country's largest private employers, said Christopher Balding, professor at Peking University's HSBC Business School.

China's largest online shopping portal has been on the defensive since the office of the US Trade Representative last month put its massive electronic sales platform Taobao on its annual blacklist, saying it was not doing enough to curb sales of fake and pirated goods.

Although inclusion on the blacklist carries no penalties of itself, it dealt a blow to Alibaba's efforts to improve its image and boost international sales. "This is more made to relieve its PR pressure, so Alibaba won't become a target of attack after Trump takes office," Li added. "As Alibaba's counterfeits problem is indeed quite serious, it is an easy target."

Jack Ma's million jobs pledge more PR than promise

'Good relationships'

This month Alibaba filed a lawsuit in China against two vendors for allegedly selling fake Swarovski watches on Taobao, portraying the move as the first time an e-commerce site had taken a counterfeiter to court in the world's second-largest economy.

"Jack Ma is a smart guy and if there is anything being a major businessman in China teaches you it is the importance of having good relationships with the leaders," Balding added. Alibaba and Taobao have long been accused of providing a platform for the sale of knockoff brand-name goods.

Items for sale include a variety of Trump-related products, including "Make America Great Again" hats that sell for 25 dollars on Trump's website available for 3.5 yuan (50 cents) Wednesday. Analysts say Alibaba wants to enhance its imports of US merchandise for Chinese consumers.

"It is not necessarily to create more jobs in the US, it is simply providing one more sales channel for them," Nell Lu, analyst with Shanghai's Business Connect China consulting firm told AFP. Scandals over food safety and milk powder have eroded Chinese shoppers' confidence in domestic goods, fuelling lively informal grey markets in food, vitamins, and medicines from all over the world.

While dominant in its home market, and making forays into Russia and Southeast Asia, Alibaba's efforts in the US have so far failed to find the same success. Its business model as a platform offers US consumers no extra benefits, Li said, and it faces dominant local competitors such as Amazon and eBay.

Even so Ma wants half of Alibaba's revenue to be international within 10 years. The firm's Ant Financial affiliate, which operates digital payments service Alipay, and Tmall International are likely to be its "primary vehicles" for gaining a US foothold, Jeffrey Towson, professor at the Peking University Guanghua School of Management, told AFP.

Jack Ma's million jobs pledge more PR than promise

'Open-minded'

"Alibaba is serious about the USA," he said, adding the Trump meeting was "good PR" for the firm and introduced Ma to many Americans who had not heard of him. "Every business person in China, and globally, now knows that what Trump wants to hear about is US jobs. So that is what they are all now saying."

After the meeting the two multi-billionaires praised one another, with the Chinese tycoon calling the president-elect "very smart" and "very open-minded". Trump's nominee for the Securities and Exchange Commission, Jay Clayton, has ties to Alibaba from working on its IPO on the New York Stock Exchange, the largest public offering in history.

Chinese media trumpeted the Trump-Ma meeting as a sign of the benefits of the economic relationship between the US and China. On Wednesday an editorial in the China Daily newspaper said it would reassure those worried about "havoc" from the incoming administration and said it shows Trump was "willing to adopt a less belligerent and more flexible approach than some of his remarks might suggest".

It added that people should not "rigidly interpret" the jobs pledge to mean full-time corporate positions, but rather focus on how it would help small businesses and American farmers sell to the Asian market. "This should really be self-evident." (AFP)

Photo 1 and 2: Courtesy of the Alibaba Group

Photo 3: Donald Trump, by Gage Skidmore via Flickr