Muji has become the latest retailer to lose the handle on its balance sheet amid the coronavirus pandemic.
The Japanese chain’s United States arm, Muji USA Ltd., filed for Chapter 11 protection in Delaware on Friday. Its business in America has been operating at a loss for the past three fiscal years, but the health crisis led to store shutdowns that only further dampened its sales.
According to owner Ryohin Keikaku Co., Muji, which has 18 units in the U.S., had been grappling with losses that stemmed from high rent and other costs even before the outbreak took hold. Then starting mid-March, its entire brick-and-mortar fleet across the country was forced to shut down for weeks to help curb the spread of COVID-19.
The pandemic led Ryohin Keikaku to its first quarterly operating loss in more than a decade: The Japan-based company logged a net loss of 4.1 billion yen (or $38.5 million at current exchange) for the three months ended May 31, compared with a net profit of 6.6 billion yen ($61.7 million) in the prior-year quarter.
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In the last fiscal year, Muji’s U.S. entity suffered a loss of around $10 million. Under bankruptcy proceedings, the chain plans to shutter some unprofitable outposts, as well as renegotiate leases with its landlords. (Its operations in other global markets will not be affected.)
The filing put the minimalist fashion, home and accessories retailer’s assets and liabilities in the range of $50 million to $100 million, while its number of creditors extend from 200 to 999.
The health crisis has led many operators in the fashion and footwear sectors to file bankruptcy, including specialty chain J.Crew, department stores Neiman Marcus and JCPenney, denim giants G-Star Raw and True Religion, Zac Posen owner Centric Brands and off-pricer Stage Stores.
And across the industry, widespread store closures and a subsequent decline in foot traffic led many nonessential retailers to furlough or lay off their associates, defer capital spending and tap funds available under their revolving credit facilities.