Furla USA pushed to bankruptcy by Covid-19 closures
The U.S.-based subsidiary of Italian luxury brand Furla has filed for Chapter 11 bankruptcy due to the negative impact of the Covid-19 pandemic.
According to Furla, it does not intend to leave the U.S. market definitively, but is looking to restructure its operations in the country so as to better position itself for growth in the future.
“Although [Furla USA] believes its core business model is sound and expects that sales volume will increase as the Covid-19 pandemic recedes, the substantial uncertainty regarding the length of the pandemic and its lasting economic effects make a prompt return to pre-pandemic sales levels unlikely,” wrote Furla USA CEO Elena Moncigoli in filings made in New York bankruptcy court.
“Thus, debtor has filed this case in an effort to reorganize its balance sheet and preserve and maximize value for all stakeholders,” she explained.
Furla USA’s court filings also provide further details concerning the reasons for the company’s petition for Chapter 11 relief. The brand had already been suffering from reduced foot traffic in its stores, but the coronavirus pandemic exacerbated this problem, forcing the company to temporarily close its U.S. retail locations in March, and subsequently reducing circulation when stores reopened.
Furla currently runs 14 stores in the country, eight of which are outlets. It has had particular issues with its locations in Indianapolis and Boston, which rely more on local shoppers than business from tourists. As part of bankruptcy proceedings, the company is planning to shutter four brick-and-mortar locations.
Revenues from this physical retail network accounted for $22 million or almost 60% of Furla USA’s net sales last year. Wholesale revenues were $13 million, making up another 35% of the annual total, while e-commerce sales came to $2.8 million, representing only about 7% of full-company revenues.
The brand is therefore heavily reliant on its brick-and-mortar and wholesale businesses, both of which were strongly impacted by store closures related to the health crisis.
As well as temporarily closing its stores and attempting to negotiate relief with landlords, Furla USA also furloughed 90 employees when coronavirus struck, a figure which the company said was “a majority of its workforce” at the time. According to the court filings, the retailer currently has 34 full-time employees and 17 part-time employees.
Prior to the coronavirus pandemic, Furla USA had already made moves to reduce costs through a strategy focusing on the development of its e-commerce capacities and wholesale network, efforts which will presumably continue to be core pillars of the company’s plans for the future.
Founded in Bologna, Italy in 1927, Furla entered the U.S. market in 1989 and currently boasts some 500 stores around the world.
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