Retailer Soft Surroundings files for bankruptcy; all locations to shut down operations
Taking a Dive into Soft Surroundings' Bankruptcy
- Soft Surroundings, a women's apparel retailer, recently filed for Chapter 11 bankruptcy in the Southern District of Texas's Houston Division, marking the end of its 44 brick-and-mortar stores.
- Coldwater Creek, its rival, plans to buy the company's remaining assets and continue selling the brand's apparel and accessories online and via catalogs.
- Employing about 646 individuals, Soft Surroundings has 450 employees at retail stores, 140 at its headquarters, 15 at its call center, and 50 at its former distribution center in Mexico, Missouri. The company managed to secure $18 million in debtor-in-possession financing from liquidation consultancy Gordon Brothers to maintain business operations.
Breaking Down the Bankruptcy
Soft Surroundings' locations, scattered across 24 states, once graced the country. When the pandemic hit, the retailer operated 80 stores. Court documents reveal the company struggled to recuperate from lost sales and market changes during and post-outbreak, with excess inventory from closed stores impacting profit margins and depleting its liquidity. Last year, the company shuttered 25 stores and now they will all be a relic of the past, transforming into an online-based direct-to-consumer brand under Coldwater Creek's control. E-commerce has been the backbone of Soft Surroundings' sales, generating $141.6 million last year, accounting for 65.4% of total sales.
Soft Surroundings' Sagging Fortunes
The St. Louis-based brand mailed out its first catalog in 1999 and opened its first store, in its hometown, in 2005. RecΠ‘ently, however, the company stumbled, and spent the last few months trying to bolster its finances, according to Executive Chair Bridgit Lombard’s statement. The retail sector has been ruthless during the pandemic, and Soft Surroundings seems to have been no exception. Shoppers turned to off-price stores and promotional events in their quest for deals, as inflation and financial pressures took a toll.
In court documents, the company's restructuring officer, Curt Kroll, cited "macroeconomic conditions and high fixed costs that impacted the company's margins over the last several years." Besides external pressures, customer feedback points to internal glitches. Complaints about prolonged hold times, refund delays, language barriers, and supply chain issues have been rampant, with one customer branding the service "ATROCIOUS." Adding to the woes, the company's ownership appears to have changed, resulting in diminished product quality and longer lead times due to shipping delays.
- The pandemic, with its economic disruptions, has been a significant factor in Soft Surroundings' Chapter 11 bankruptcy filing.
- Despite the liquidation of its 44 brick-and-mortar stores, Soft Surroundings' brand may continue online under Coldwater Creek's ownership.
- Soft Surroundings, once expansive with locations across 24 states, has faced struggles reconciling lost sales and market changes during and post-pandemic.
- The retail sector has been particularly hard-hit during the pandemic, with Soft Surroundings appearing to be no exception as shoppers sought out off-price stores and promotional events.
- AI-driven retail businesses like Soft Surroundings have faced external pressures such as macroeconomic conditions and high fixed costs that have impacted their profit margins.
- Internal issues, such as complaints about prolonged hold times, refund delays, language barriers, supply chain problems, and diminished product quality due to ownership changes, have also contributed to Soft Surroundings' financial woes.
- According to one customer's criticism, Soft Surroundings' service was deemed "ATROCIOUS."
- To keep operations running, Soft Surroundings secured $18 million in debtor-in-possession financing from liquidation consultancy Gordon Brothers.
