Dots Files for Chapter 11, Closing 36 Stores

Dots, a 400-store discount retailer of clothes and accessories, filed for Chapter 11 in New Jersey federal court on Jan. 21.

The 27–year-old chain, which has approximately 400 off-mall stores in 20 states in the Midwest, East, and Southeast, plans to close 36 “chronically underperforming” stores and is looking for new investors or a sale, it said.

In a declaration to the court, CEO Lisa Rhodes said the filing was caused in part by decisions by prior management, which stocked merchandise that was “too young” for its core customer, of lesser quality, with confusing pricing. Dots’ new management has reoriented the merchandise to the plus-size market and 25- to 35-year-old customer, she added. 

The company estimates that sales for the fiscal year ended Jan. 31, 2014, will total $293.7 million, which is down from the $346.2 million it logged for fiscal year 2012.

Rhodes said despite what she called improving results, the company has been hampered by a challenging macro economy, a competitive retail environment, and unfavorable leases, leading to the Chapter 11 filing. The company’s current unsecured debts total $47 million, with $13.8 million of that trade vendor payables. 

“The filing is the best option available to restructure certain operations, preserve the business as a going concern, and maximize the value of the enterprise by pursuing a sale,” Rhodes said in a press statement. “We are in the process of turning the business around, and the filing is another step toward doing that.”

Salus Capital, the company’s existing lender, has provided a $36 million Debtor-in-Possession (DIP) financing facility to support ongoing operations during its reorganization.

Dots is just the latest discount accessory retailer to file for Chapter 11, following Loehmann’s, Syms, and Filene’s Basement.

JCK News Director