Brooks Brothers are at a crossroads: to sell the three US factories or shut them

Brooks Brothers are at a crossroads: to sell the three US factories or shut them

The deadline, set by mid-July, is approaching. As time goes by, Brooks Brothers are at a crossroads now: either they find a buyer who is willing to purchase the three factories they manage in the United States, or they will have to shut them down. The New York Times has depicted such scenario for the US brand, which is also looking for new credit lines following the detrimental effects of Coronavirus outbreak.

Brooks Brothers are at a crossroads

According to the NYT, the issue Brooke Brothers must deal with is about production strategy. In fact, their US factories, located in New York, in Massachusetts and in North Carolina respectively, do not actually meet demand for the category product that is currently driving sales, namely casual wear.

Priority

On the one hand, Vanessa Friedman, Fashion Director at the New York daily newspaper, has raised a question about the brand’s identity, made in the USA, which the company might possibly lose. Yet, on the other hand, the ownership, who refer to Claudio Del Vecchio, primarily focus their attention on expenses and costs related to a prospective reconversion of the three manufacturing plants. “Regretfully – quoting Del Vecchio’s comment, reported by the NYT – for the time being we have to save and keep the whole of our assets to make sure we will manage to overcome such crisis”.

The pieces of the puzzle

Looking, once more, at the scenario recently depicted by the New York daily newspaper, over the last three-year period, from 2017 to 2019, Brooks Brothers’ annual turnover consistently amounted to about one billion dollars. Debts, meanwhile, have been reaching around 300 million dollars. Supply and sales overall standstill, caused by lockdown restrictions, was not beneficial of course. That is why the company, which had already appointed, in 2019, PJ Solomon investment bank to seek some investors, has actively opened a 20-million-dollar credit line with Gordon Brothers.

Outlook

As subsequently reported by MFF, Brooks Brothers have also applied for a debtor-in-possession financial support, which is a type of credit granted to businesses dealing with “reorganization in accordance with bankruptcy law”. While possibly considering, in the future, the Chapter 11 option, the company has made a public statement about the latest rumours: “In the course of regular business activities, Brooks Brothers (the picture in the news is taken from their website) keep exploring several strategic options to pinpoint a sound standing towards financial growth and success”.

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