Crabtree & Evelyn Bankruptcy Emergence an Unusual Retail Rebound

Last Updated Jan 20, 2010 5:46 PM EST

The last year and a half brought some very big retail bankruptcies that led to massive store closures. Circuit City is gone, as is Linen's 'n Things and West Coast department-store chain Mervyn's. In those cases and others, the companies were not able to emerge from bankruptcy.

But Crabtree & Evelyn bucks that trend. The skin-care-products company will emerge from Chapter 11 bankruptcy by the end of the month and isn't even closing a majority of its stores. Crabtree is left with 91 units down from its 126 locations when it originally filed for bankruptcy in July.

"It is almost unique since 2005 for a retailer to reorganize," bankruptcy attorney Larry Gottlieb told Reuters. Bankruptcy laws enacted that year made it more difficult for a retailer to emerge without closing significant numbers of stores.

Crabtree, owned by Malaysian firm KL Kepong, will get $26.3 million in exit financing from that entity, which is also providing $40 million in debtor-in-possession financing. Part of management's plan is to focus more on the company's wholesale business, which is said to have 4,000 accounts worldwide.

On the retail end, there is also some good news for Crabtree. Limited Brands' (LTD) Bath & Body Works, a much larger competitor with just over 1,600 stores, is posting a sales turnaround and recently recorded its best quarter since the beginning of 2007. But in contrast, The Body Shop, owned by cosmetic's giant L'Oreal with just over 2,500 stores worldwide, didn't fare so well in its most recently reported financial quarter, when sales at stores open at least a year fell 2.4 percent.

Crabtree's situation is unique in that it dodged an unfortunate fate shared by many retailers that needed to close their doors. But if some industry observers are correct, we might not see our share or major store closings again in 2010.

Image by Flickr user wwphotos.
  • Ian Ritter

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