Century 21 files for bankruptcy and closes its stores

The “Full Sale” signs have been hanging for over a week at Century 21, the department store where for the cost of a few hours a shopper could stumble across a suit Hugo Boss or a pair of Yves Saint Laurent shoes at a great discount. In early September, the company announced that it will file for Chapter 11 bankruptcy protection to close its 13 stores and e-commerce operations, bringing to an end this family-owned business that was founded in 1961.

Many New Yorkers are mourning her death, though few expressed surprise at her disappearance. “I feel like I grew up in the original one downtown and it had the best deals, but then it became a traditional department store that didn't have the same kind of hunting (for deals),” Meredith Paley, 53, said as she waited. in line to browse during the store's closing sale on the Upper West Side.

The bargain hunters

Century 21's flagship store at the World Trade Center has been a destination for tourists and local bargain hunters for decades. Her name appeared on the HBO television series Sex and the City when Carrie Bradshaw, the character played by Sarah Jessica Parker< /b>, called the downtown store "the best part of being a jury."

A mention the company still clung to for its bona fide discounts in a footnote to a court filing earlier this year. For all those people in New York who felt left out by the staff or the prices of traditional department stores, Century 21 was akin to Valhalla.

It was the opposite of the company-only sample sale, which was tucked away on the third floor of a nondescript building in the Garment District. For legions of NYU college students, the short subway ride downtown was almost a part of orientation, a rite of passage akin to the annual Barney's Warehouse sale that allowed twentysomethings to play dress-up. with brands they couldn't otherwise afford.

A turbulent year

Century 21's bankruptcy and liquidation proceedings are just the latest in a turbulent year for US retailers hit by a sharp drop in consumer spending as the coronavirus spreads. It spread relentlessly throughout the country. Neiman Marcus, J Crew, Lord & Taylor, Brooks Brothers and JC Penney also filed for bankruptcy this year.

Barneys, the luxury goods department store, closed its doors for good earlier this year after filing for bankruptcy in 2019.

Century 21, which generated $747 million in revenue in the last fiscal year, said it was forced to close after its insurers, including Maurice Greenberg's Starr Group and Allianz, failed to pay the business continuity insurance, after the economic closure forced by the pandemic.

The department store sued its insurers in July for $175 million after defaulting on a revolving credit line, with a debt of $56 million to JPMorgan Chase, Bank of America and Bank Hapoalim. It owed even more millions of dollars to suppliers like PVH, owner of Calvin Klein.

Insurance money helped save the company in the past. Century 21's flagship store on Cortlandt Street sustained extensive damage in the 9/11 attacks in Manhattan, forcing it to close.

The retailer ultimately opted to rebuild on the same site, reopening months later and remaining a destination as new skyscrapers reappeared around it. Although the company's financial records are private, discount retailers often do well during economic downturns.

“Discount prices are attractive in and out of a recession, so it's surprising to see them close,” says Cowen analyst John Kernan. Discount stores thrived during the last financial crisis, even as the fashion industry suffered.

Customer traffic at TJ Maxx and TJX, the owner of Marshall's, increased in 2008 and 2009, with both it and discount rival Ross Stores reporting increased revenue. E-commerce sites like Gilt Groupe and Rue La La flourished, while major department stores worked to expand into discount store business as they had excess inventory.

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But the 2020 retail spending crash far exceeded anything clothing retailers had seen in the previous four decades. Confined to their homes, consumers didn't feel the need to splurge on cocktail dresses or work clothes.

It is not clear when the demand for this type of merchandise will return. “In 2008, people were still gathering in large groups and socializing and carrying on much of their daily lifestyle,” says Alexandra Wilkis Wilson, one of Gilt's co-founders. “Last spring, consumers quickly became accustomed to living their lives from home…lifestyle differences really had an impact on how consumers think about spending.”

Competition for bargains

Wilkis Wilson walked the floors of the downtown Century 21 store in the early days of Gilt to research which brands were overstocked and see what was selling well. Years before, when he was an analyst at Merrill Lynch, he used to come to the store at lunchtime.

That was before real estate developer Brookfield built an upscale mall across from the World Trade Center, when downtown shopping options were still scarce. “It was a New York landmark,” he adds, “an institution.”

But competition in the discount pricing industry has intensified since the 2008-2009 crisis. Luxury goods providers have moved away from wholesale distributors and developed their own e-commerce and retail operations.

Many opened their own outlets (discount stores), trying to capitalize on the bargain-seeking consumer. This made shopping increasingly unpredictable at a department store like Century 21, which now had a harder time getting top-brand products.

The company also faced increasing competition from online channels, where shoppers can easily compare prices and snag bargains without having to scour many clothing racks. Thrift sites like The RealReal, which sell gently used items from brands like Chanel and Hermès, have grown into $1 billion-revenue businesses.

Frustrated plans

The Gindi family, which owns Century 21, was still planning its expansion before the coronavirus hit. The company has agreed to open a store across the Hudson River in American Dream, New Jersey's much-maligned megamall that after years of redevelopment was planning to open its doors to shoppers in March. There were also plans for two more physical stores.

That, of course, will no longer happen. Century 21 was unable to find a buyer for its business and no investors came forward to inject new cash. It's unclear what will come to replace its cavernous Financial District location as other clothing retailers pull out and restaurants and gyms close.

“It was always a good thing to be able to come shopping and find great deals,” said Rance Warlock, a New Yorker who was waiting in line to shop at the closing-of-store clearance sale. "I'm not a brand guy, but quality is important."

The city, of course, has already found a way to move forward. The Century 21 store near Lincoln Center was previously a Barnes & Noble, the famous bookstore blamed for fueling the decline of independent bookstores in the 1990s.

But in 2010, the company decided it couldn't keep up with rising rents and decided to close that neighborhood landmark. “This space was always important,” Warlock added. "There are so many vacant spaces in the area... It's sad."

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