Denim fashion brand Diesel USA has filed for Chapter 11 protection with the US bankruptcy court in Delaware on Tuesday.
The decision was based on various factors affecting the business, including recession, the downturn in the retail industry, huge losses, decline in sales and several leases. A hit by theft and cyber fraud also left the company with $1.2m in losses.
The company’s parent, Diesel SpA is not included in part the Chapter 11 filing.
According to the court filings, the company has seen a decline in annual sales since 2014. The company noted that the losses are concentrated at its full-price brick-and-mortar stores.
Diesel USA chief restructuring officer Mark Samson said: “In response to the recession, prior management attempted to implement an out-of-court reorganisation of the business, which, despite producing limited short-term results, unfortunately worsened the debtor’s problems in the long-term rather than solve them.
“The debtor has spent the past year attempting to address these issues outside the context of chapter 11. Unfortunately, those efforts have been unsuccessful.
“Consequently, the debtor commenced this Chapter 11 case to obtain relief from its burdensome unexpired leases and executory contracts in order to revive its brick-and-mortar retail operations, which will allow it the opportunity to implement the reorganisation business plan.”
He also noted that the company is currently in the process of analysing executory contracts and unexpired leases, to determine which will be rejected and which will be continued further.
Samson added: “Absent the ability to utilise the Chapter 11 process to obtain such relief, the debtor’s ability to continue operating would be severely threatened and it would be unable to implement the Reorganisation Business Plan, which is crucial to its ability to continue operating as a going-concern.”
Diesel USA currently operates 28 brick-and-mortar stores including 17 full-price stores and 11 factory outlets across 11 states.