Diesel US Business Bankruptcy High Price Jeans Do Not Sell Even Loss For 11 Years

As demand for high-end jeans at $200 per unit for many years has been weakening for many years, coupled with its strategic mistakes and lax management, Italy's denim brand Diesel SpA's US business Diesel USA Inc. has filed for bankruptcy recently.

Diesel USA Inc. pointed out in a document submitted to the bankruptcy court of Delaware that the company has exclusively distributed Diesel brand in the United States since 1995, and now has 380 employees, 28 independent stores and wholesale businesses. The current assets range from $50 million to $100 million, and liabilities range from $1000-5000.

In the document, management has made clear that sales slump, successive losses, high rent and fraud and theft are the main reasons for company bankruptcy. Mark Samson, chief reorganisation officer of Diesel USA Inc., said sales of 28 independent stores dropped by more than 40% in the past four years, from $125 million in 2014 to $72 million 500 thousand. At the same time, the former management made a strategy to expand the gold area at great cost. In the 2008-2015 years, the capital expenditure of the company reached US $90 million, most of which invested in the physical stores.

For example, the old management did not take the New York Fifth Avenue flagship store, which had recorded a huge loss in the past 2008-2015 years, but invested 18 million dollars in the same year. It signed the expensive lease which was due to expire in 2024 on the next Madison Avenue, and the store not only failed to sell off the cost, but also made a sharp decline in sales. Last year, management began to discuss rent reduction with multiple shop owners, but only one shopkeeper was willing to "make a difference".

It is also from 2008 that Diesel USA Inc. no longer recorded profits. The total operating losses in the past eleven years amounted to US $198 million. After the financial crisis, the company recorded the highest income of $221 million in 2012, and dropped to $104 million in 2018, of which wholesale sales fell from US $69 million in 2014 to US $19 million in 2018.

The reason for the loss is that 2016-2018 years ago, employees had stolen 900 thousand cash from a shop, and two Internet fraud resulted in a loss of 300 thousand dollars.

Diesel USA Inc. did not intend to sharply reduce the size of its retail business, like other bankrupt retailers. Instead, it proposed a three year profit improvement plan. It will withdraw some tenant refuses to give up the lease in the future, resetting stores to reduce operating costs, and will continue to open new stores. Improving product lines and using net red to attract millennial generation, "Z generation" and other new customers are also the focus.

In the footwear chain discounts, Payless Inc. filed for bankruptcy second times last month and gave up 2500 stores, and Victoria "s" Victoria of Gap Inc. (NYSE:GPS) GAPP group and L Brands Inc. (NYSE:LB). In the background of the secrets of Vitoria's secret and the subdivision giants of the clothing and other clothing sectors, they continued to close.

Throughout the high-end jeans market, a crowd of breakout brands at the beginning of the new millennium has gradually declined with the fast fashion and sports leisure products sweeping the United States. Euromonitor International international data showed that the retail sales of American jeans fell from US $18 billion 800 million in 2013 to US $16 billion 300 million in 2017. In the same year, the size of jeans was exceeded by knitted pants.

In 2016, VF Corp. (NYSE:VFC) Wei Fu group sold the 7 For All Mankind to Delta Galil Industries Ltd. of Israel textile group. In 2017, True Religion carried out bankruptcy reorganization in accordance with the eleventh chapter of the bankruptcy law, greatly reduced the debt to 3/4 $113 million 500 thousand, and the deadline extended to 2022. The brand also sharply lowered the price. The continued loss of J Brand has made Uniqlo UNIQLO parent Fast Retailing Co. Ltd. (9983.T) fast selling group headache.

In 2018, retail sales of jeans in the United States had recovered a slight increase of 2.2%. The 166 year old Levi Strauss & Co. Levi's has also submitted a listing document ready to return to the open market in opposition to 34 years. The group is closely related to the millennial generation through marketing and product innovation, and its revenue has achieved double-digit growth for five consecutive quarters.