Bankrupt Muji to Shutter All Stores in California Amid Bankruptcy

Muji is set to shut down all of its stores in California amid bankruptcy proceedings.

The Japanese chain’s United States arm, Muji USA Ltd. — which filed for Chapter 11 protection three weeks ago — announced in a filing last week that it plans to exit the California market and permanently close seven of its locations in the state.

The units are located in Los Angeles, San Francisco and Hollywood, as well as Santa Anita, Stanford, San Jose and Santa Monica. Muji intends to relocate all unsold inventory from those outposts — with the help of certain recently furloughed employees who will be compensated with severance — and surrender its leased buildings by today’s end.

Separately, the retailer is working with B. Riley Real Estate in negotiations over lease amendments related to its stores outside of California. Should those talks be unsuccessful, the company said it could shutter additional stores across the country. (Its operations in other global markets will not be affected.)

Muji has 18 units in the United States. According to owner Ryohin Keikaku Co., the chain 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: Early this month, 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.

In the last fiscal year, Muji’s U.S. entity suffered a loss of around $10 million. Its bankruptcy filing showed that it had assets and liabilities in the range of $50 million to $100 million, while its number of creditors extended from 200 to 999.

The coronavirus pandemic has led many firms in the fashion and footwear sectors to file for 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.

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