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With Century 21 Going Out of Business, Where Will Designer Labels Sell Their Old Inventory Now?

Last week, Century 21 voluntarily filed for Chapter 11 protection in the United States Bankruptcy Court for the Southern District of New York. Along with the filing, it also submitted motions to start going-out-of-business sales at its 13 locations across New York, New Jersey, Pennsylvania and Florida.

As another retailer bites the dust, questions have surfaced about the future of the brands that have for decades unloaded their already-discounted merchandise into the chain, which had long dubbed itself a pioneer of off-price selling.

“[Some] stores [won’t] have a place to offload their excess inventory,” explained Jake Cohen, director of product at Boston-based marketing firm Klaviyo. “This will ultimately impact how brands create their sell-through strategies.”

Still, some brands might have seen the writing on the wall for several months. Prior to the pandemic, off-pricers served as a critical channel for brands to distribute their marked-down designer wares. But with the coronavirus outbreak taking hold in the United States, fashion labels — most of which had to temporarily shutter their stores across the country in accordance with government orders — had to pivot aggressively toward digital channels, pushing down the importance of off-pricers that rely heavily on in-store experience.

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“Consumer demand to buy from off-price retailers is down due to a reluctance to go into a physical store,” Cohen said, adding that, as a result, off-price retailers had already been cutting back on their buying activity.

It’s a trend that’s been further boosted by the fact that coronavirus-cautious consumers aren’t being lured into stores for the “thrill of the hunt” experience that was once a big draw for discount chains.

It remains to be seen how these trends will impact the off-price stores that continue to operate in the era of COVID-19 such as TJ Maxx, Marshalls and Burlington. However, early reads on their earnings reports indicate firms like TJ Maxx and Marshalls have seen some benefits of pent-up demand.

Where the demise of Century 21 is concerned, big-name brands to whom it owes hefty sums are likely to feel the immediate burn of its liquidation. In its bankruptcy filing on Thursday, the 60-year-old retailer — whose estimated assets and liabilities are both in the range of $100 million to $500 million — shared that PVH Corp., parent of Calvin Klein and Tommy Hilfiger, is due $4.8 million, or the second-highest claim, while G-III Leather Fashion is unpaid $4.2 million. (No. 1 on the list is financial holding firm CIT Group, which is owed about $5.9 million.)

Meanwhile, Adidas has a claim of $1.2 million; Michael Kors is due $1 million; Zara is unpaid $908,514; and Hanes Brands is owed $783,855. Other fashion names for which Century 21 has an outstanding tab include Puma at $455,572; Nike at $431,046; and Cole Haan for $423,162.

Century 21 also encouraged customers to shop discounted designer wares at its stores and online at C21Stores.com “while merchandise selection is best.” The above-mentioned brands — as well as more labels like Anne Klein, Happy Socks, Kenneth Cole, Steve Madden and Vince Camuto — could eventually see their products significantly marked down. Although this is not expected to impact their bottom lines (as brands have already sold their off-price items to the chain), those labels are now forced to find other retail avenues in upcoming seasons to distribute their merchandise.

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