Teen Fashion Chain Declares Bankruptcy For the Third Time, Closing Hundreds of Stores

By: Georgia | Published: May 03, 2024

Rue21, a teen clothing retailer, is closing its doors for good, affecting all 540 of its locations. 

This decision follows the company’s third filing for Chapter 11 bankruptcy protection.

The Final Chapter for Rue21

From its headquarters in Warrendale, Pennsylvania, Rue21 has sought bankruptcy protection once again, this time in Wilmington, Delaware. 

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Inside a Rue21 store featuring various clothing racks with dresses, tops, and jeans, and displays for plus sizes

Source: rue21/Facebook

What sets this instance apart is the company’s plan to close all locations within the next two months, effectively ending its retail operations.

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A Troubled Retail Landscape

The past year has been tough for the retail industry, with Rue21 just one of several chains to seek bankruptcy protection.

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Nighttime exterior of a Rite Aid pharmacy showing the illuminated Rite Aid logo above the entrance and a "Drive Thru" sign

Source: Wikimedia Commons

Major players like Rite Aid and Express are also downsizing significantly, highlighting broader sector challenges amid tough economic conditions.

Rue21’s Silent Goodbye

As their stores prepare to shut down, Rue21 has remained tight-lipped, not responding to media inquiries. 

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Interior of a busy Rue21 store with customers shopping and browsing through clothes racks filled with various garments

Source: Wikimedia Commons

With the website also down, it seems the brand is quietly exiting the stage.

CEO Cites Pandemic and Market Shifts

Rue21’s Interim CEO Michele Pascoe has outlined the severe impacts of the COVID-19 pandemic and shifting market trends on the company’s operations. 

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Close-up of a window with a handwritten note saying "Sorry we are closed, COVID-19" affixed to the glass

Source: Anastasiia Chepinska/Unsplash

These challenges mirror those faced by many in the retail industry, exacerbating the company’s precarious financial state.

Behind the Decision to Liquidate

Michele Pascoe has explained the rationale for the company’s liquidation.

Exterior of a Rue21 store in a shopping plaza, showing a clear sky and parked cars, with the store's signage prominently displayed

Source: Wikimedia Commons

She said, “It became apparent that proposals to purchase the debtors’ assets at a going-concern value would not exceed the projected proceeds that could be realized by liquidating the debtors’ store-level inventory and assets, closing down their brick-and-mortar retail locations, and winding down operations.”

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Enlisting Expert Help for Store Closures

To facilitate the extensive process of closing its stores, Rue21 has partnered with Gordon Brothers, a Boston-based firm specializing in such transitions. 

Inside a clothing store, a mannequin wears a beige Nirvana t-shirt in front of racks filled with jeans and signs advertising various deals on apparel

Source: rue21/Facebook

This collaboration aims to streamline the liquidation and ensure that it is completed efficiently.

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Rue21's Mall Dominance Ends

A significant portion of Rue21’s operations were mall-based, with 309 stores located in various shopping centers.

Front view of a Rue21 store in a shopping mall, featuring large display windows with colorful advertising and signage

Source: Wikimedia Commons

The impending closures will significantly alter the retail mix in these malls, affecting not just Rue21 but the shopping centers themselves.

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New Opportunities for Retailers

Bill Read from Retail Specialists sees potential amid the closures, suggesting on LinkedIn that “It’s apparent a lot of these stores will close.”

A bustling shopping mall interior with multiple levels, showcasing shoppers on escalators surrounded by large decorative silver balls hanging from the ceiling

Source: Viktor Bystrov/Unsplash

He notes that this could lead to new retail opportunities in markets that have been historically tight on space.

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From Expansion to Reduction

Rue21’s journey from a high of 1,000 stores to its current state is a tale of rapid expansion followed by a harsh financial reality check.

Three young adults laughing and sharing holiday gifts, with the young woman opening a red gift box. They are all dressed in casual, stylish winter clothing

Source: rue21/Facebook

This dramatic rise and fall have forced the company to reevaluate its strategy repeatedly over the years.

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The Second Life of a Brand

Post-2003 bankruptcy, the then-named Pennsylvania Fashions rebranded to Rue21. 

A view of a Rue21 store located in a strip mall alongside other stores including David's Bridal and LifeWay Christian Store, under a clear blue sky

Source: Wikimedia Commons

They tried to adapt by going public in 2009, yet here we are, witnessing another chapter close.

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Persistent Challenges Lead to Closure

Pascoe has highlighted the continuous operational challenges, noting, “The debtors’ substantial brick-and-mortar presence, coupled with the fact that their business was heavily dependent on physical in-store traffic, created significant challenges to the debtors’ profitability.”

Interior view of a Rue21 store with diverse clothing options displayed on racks and shelves, including graphic t-shirts, dresses, and beauty products on central display tables

Source: rue21/Facebook

These issues have culminated in the decision to close all stores following the latest bankruptcy filing.

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