January 25, 2021 – L'Occitane, Inc. (“L'Occitaine or the “Debtor”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of New Jersey, lead case number 21-10632. The Debtor, a leading U.S. retailer of beauty and well-being products, are represented by Mark E. Hall of Fox Rothschild LLP. Further board-authorized engagements include (i) RK Consultants as financial advisors, (ii) Hilco Real Estate, LLC as real estate consultants and (iii) Stretto as claims agent.
At filing, the Debtor noted between 200 and 1,000 creditors, estimated assets of $161,063,000 and estimated liabilities of $161,659,000. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) ESRT 112 West 34th Street, LLC ($595k rent claim), (ii) Astor Retail Strategic Venture LLC ($581k rent claim) and (iii) WTC Retail Owner LLC ($421k rent claim). 18 of the Debtor's top 20 unsecured creditors hold claims in respect of unpaid rent.
The Debtors are wholly-owned by L'Occitane International S.A. which is organized under the laws of Luxembourg and headquartered in Plan-Les-Ouates, Switzerland.
In a press release announcing the filing, the Debtors advised that their: “business continues to be impacted by disproportionately high store rent obligations that are no longer tenable. The Company determined that a Chapter 11 process was the necessary path to right-size its brick-and-mortar presence following repeated endeavors to engage with its landlords to address unmanageable store lease terms.
To implement this store footprint optimization plan, including the contemplated exit of unprofitable locations, the Company commenced a voluntary case under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey. The filing does not include the L'OCCITANE en Provence brand or any operations outside the U.S.; parent company L'Occitane International S.A. ("Group"); or any other Group subsidiaries, including ELEMIS and LimeLife.
The initiative announced today will allow the Company to create a sustainable U.S. store platform for the long term.”
Goal of the Chapter 11 Filings
The Tanini Declaration (defined below) provides: "…the Debtor’s primary goal in chapter 11 is to right-size its physical footprint in part by rejecting certain leases to enable the Debtor to better adapt and cultivate sustained profitability in light of the increasing shift to online purchasing and the impact of the COVID-19 pandemic on brick- and-mortar retail sales."
The Debtor leases all of its 166 locations, as well as its corporate offices and a distribution center under operating leases that expire on various dates, with the longest lease term on the Petition Date expiring in 115 months. As of the Petition date, the aggregate amount of annual and monthly gross rent due to landlords on all leases is approximately $30,290,984.00 and $2,524,249.00, respectively. As of December 31, 2020, the Debtor’s total remaining lease obligations under the terms of its current leases is approximately $112,754,750.00. As of Petition date, the Debtor is currently $15,087,468.00 in arrears on its leases. Landlords are holding approximately $516,000.00 in security deposits (of which $125,000.00 is held by the landlord for the Distribution Center)…It is anticipated that the total amount of unsecured claims in this case will increase as leases are rejected.
For the Debtor’s fiscal year beginning in April 2020 through December 2020, the Debtor’s net sales were approximately $111,162,000, down nearly 21% from approximately $140,861,000 in net sales for the same period in 2019. For for that same period in 2020, brick-and-mortar retail sales declined by 56.5% and comprised just 34% of the Debtor’s total sales. Meanwhile, the Debtor’s e-commerce sales have dramatically increased by 72%, and have gone from comprising 19.6% of the Debtor’s overall sales to 42.7%.
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Tanini Declaration”), Yann Tanini, the Regional Managing Director of L’Occitane, Inc., detailed the events leading to Debtors' Chapter 11 filing. The Tanini Declaration provides: “Like most retailers in the United States, the Debtor has been impacted by the COVID-19 pandemic, which has significantly limited retail operations throughout the country and suppressed consumer willingness to shop in person. Indeed, the Debtor’s retail revenue between April and December 2020 decreased by 56.5% compared to the same period during the prior year. These changes in consumer shopping habits may endure even after the pandemic subsides, continuing to impact brick-and-mortar retail into the future.
Even prior to the pandemic, the Debtor was experiencing a decline in sales revenue from its brick-and-mortar boutiques, while its e-commerce revenue has dramatically increased. Consequently, the Debtor’s lease obligations were becoming increasingly untenable and prompted the Debtor to assess and gradually reduce its lease portfolio. The profound and sustained impact of the pandemic, however, has forced the Debtor to more aggressively address the rapidly widening gulf between its brick-and-mortar retail revenue and its substantial lease obligations, which no longer reflect the market. To this end, the Debtor diligently attempted to negotiate new lease terms with its landlords in the hope of achieving an out-of-court restructuring. Landlords, however, have been reluctant to negotiate the type of long-term adjustments to leases that are necessary to ensure the Debtor’s continued viability.”
About the Debtors
According to the Debtors: “Founded by Olivier Baussan more than 40 years ago, L'OCCITANE captures the true art de vivre of Provence, offering a sensorial immersion in the natural beauty and lifestyle of the South of France. From the texture of L'OCCITANE products to the scent, each skincare, body care, and fragrance formula promises pleasure through beauty and well-being – a moment rich in enjoyment and discovery that goes beyond tangible benefits to create a different experience of Provence. L'OCCITANE products are available at usa.loccitane.com and in boutiques throughout the U.S."
The Tanini Declaration adds: "The Debtor is the wholly-owned United States subsidiary of L’Occitane International, S.A. (the “Parent” or “International”), which is organized under the laws of Luxembourg and headquartered in Plan-Les-Ouates, Switzerland. The L’Occitane brand was originally founded in 1976 in Manosque, France by Olivier Baussan, who used a steam distillation process to produce essential oil from wild rosemary and lavender, as well as manufactured vegetable-based soaps, which he sold in the open air markets of the Provence region of France.2 The name “L’Occitane” hails from the women of Occitania, the area spanning southern France, northeastern Spain, and northern Italy during the Middle Ages. The first L’Occitane factory and boutique opened in 1981 in Volx, France.
The Debtor was formed on July 10, 1995 as a means to expand the L’Occitane brand in the United States. The Debtor is incorporated in the state of New York, and maintains its headquarters at 111 West 33rd Street, 20th FL, New York, New York 10120.
The Debtor opened its first boutique in the United States in 1996. The Debtor presently operates 166 boutiques in 36 states and Puerto Rico, at which the Debtor sells L’Occitane and affiliate-branded cosmetic and well-being products. The majority of the boutiques are located in regional malls, but there are also several street-front locations, airport locations,3 and outlets.4 The Debtor also sells products directly to customers through its website,
As of the fiscal year that ended on March 31, 2020, the Debtor comprised 9.1% of the Parent’s consolidated sales.
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The post L’Occitane, Inc. – Beauty Retailer Files Chapter 11 with Annual Sales Down 56.5% and $15mn Behind on Rent; Will Look to Reject Untenable Leases in Effort to Right-Size Bricks and Mortar Presence appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.