Anchor Blue Files for Bankruptcy, Secures DIP Funding
Anchor Blue Retail Group Inc. filed for Chapter 11 bankruptcy on May 27.
Thomas Sands, chief executive of the juniors retail chain, blamed the poor economy. “The unprecedented, sustained economic downturn and a related drop in consumer spending, especially in the teen-age market, has had a severe impact on our financial performance,” he said.
The tough news for the Ontario, Calif.–based Anchor Blue was cushioned by the announcement that it had secured $20 million in debtor-in-possession financing from Wachovia Capital Finance.
San Francisco–based Levi Strauss & Co. also announced that it would purchase 73 stores of Anchor Blue division Levi’s & Dockers Outlet by MOST, run under a licensing agreement with Anchor Blue.
Anchor Blue ran two divisions, its licensed Levi’s outlet business and its juniors retail store division, Anchor Blue. According to Sands, the company plans to close 50 Anchor Blue stores, including 15 in California. After shuttering these stores, Anchor Blue will run 127 locations.
Anchor Blue has a long heritage in California. It started business in the mid-1970s as Miller’s Surplus and then Miller’s Outpost. In 1981, the company created its own brand, Anchor Blue. In 1996, the company began its switch to the Anchor Blue nameplate.
Sun Capital Partners Inc., a private investment firm based in Boca Raton, Fla., purchased the struggling company in late 2003 after three years of declining same-store sales. Anchor Blue is an affiliate of the investment firm.
In the past few years, Anchor Blue has introduced new fashion lines and new looks for its store to reintroduce it to a new generation of juniors consumers. In November 2007, it debuted Heidiwood for Anchor Blue, a juniors line co-designed with reality star Heidi Montag. The line was discontinued one year later.
Also in 2007, it experimented with selling trendy but affordable fashions in a temporary pop-up shop called LaLa Land, which did business at high-profile retail street Third Street Promenade in Santa Monica, Calif.
Anchor Blue has a good potential to reinvent itself, said Kathleen Gasperini, co-founder of Label Networks, a Los Angeles–based youth-culture and intelligent media company that focuses on market research.
Label Networks has been surveying youth aged 13 to 25 on their favorite brands and retailers since 2000. “They’ve been slipping off of the radar in our studies in the past few years,” she said of Anchor Blue. Gasperini said the market is ripe with opportunity for retailers, however. “Some kids will name retailers as their favorite brand,” she said. —Andrew Asch
