Newsmaker: National Stores Files for Bankruptcy Protection After Half a Century in Business

For years, the Fallas and Factory 2-U stores owned by National Stores have been the favorite shopping spots for consumers in search of a bargain.

Most of the clothes and other merchandise at the Los Angeles retailer’s outposts carried very low price tags. Think T-shirts for $5 and dresses for $20.

But after a few missteps, which included buying 44 Conway Stores and picking up dozens of Anna’s Linens locations, the company found that its $111 million in debt was overwhelming. In August, National Stores filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Delaware.

Many of the organization’s creditors were manufacturers selling bargain-priced goods to the more than 340 National Stores locations that stretched across 22 states and Puerto Rico. At the time of its filing, National Stores employed 8,500 people.

In October, the company announced it was closing its 184 stores that had not already been shuttered and selling off its merchandise. It looked as though it was curtains for the retailer.

But in November, Second Avenue Capital Partners said it closed a $22 million asset-based credit facility to provide for the purchase and ongoing working capital for a new entity called Fallas Stores. Fallas Stores is buying 85 stores located in seven states and Puerto Rico from National Stores.

Michael Fallas, who was the chief executive of National Stores, is now the CEO of Fallas Stores, whose headquarters will remain in the Harbor Gateway area of Los Angeles.

National Stores joins a number of retail chains that declared bankruptcy this year. Those retailers include Sears, The Bon-Ton Stores, Claire’s, Nine West and Brookstone.

However, 2018 was a slower year for bankruptcy filings than 2017 was when scads of retailers were calling it quits. Those included Wet Seal, BCBGMaxAzria and True Religion.