- Denim clothing maker Diesel USA declared bankruptcy, citing mounting financial losses and bad investments
- The company says store thefts and fake invoices are also hurting its performance
- Diesel plans to eventually exit bankruptcy and even open additional stores
Diesel, a maker of denim clothing known for five-pocket jeans, filed for Chapter 11 bankruptcy protection, citing mounting losses, bad investments and theft.
The company cited losses at its brick-and-mortar locations, a reflection of the problems plaguing a range of retailers amid a consumer shift to online retailers such as Amazon. In its bankruptcy filing, Diesel USA chief restructuring officer Mark Samson noted the company was unable "to sustain the kinds of losses it has suffered in recent years." Diesel has 380 employees, with 28 stores in the U.S.
The company's troubles aren't only related to shifting consumer tastes. Diesel invested $90 million in capital expenditures from 2008 to 2015, with most of the money going toward its stores. But those investments were "ill-timed, excessive and unfruitful," the company acknowledged in its bankruptcy filing. Costly leases exacerbated the spending problems, it added.
"For example, [Diesel's] store on Fifth Avenue in Manhattan, which opened in 2008 and closed in 2014, by itself received approximately $18 million in capital expenditures during its tenure while generating substantial losses," the filing noted.
On top of that, the company cited "multiple incidents of theft and fraud" that lead to a $1.2 million loss over the last three years. Store thefts and fake invoices are among the problems that hurt the company's financial performance, it added.
Still, the company has a plan to recover its footing, the filing added. "The new management team has formulated a new strategic path ... to restore the Diesel brand in the United States," Samson said in the filing.
The three-year plan is aimed at returning Diesel to profitability and "preserve hundreds of jobs in addition to creating new ones through opening new stores," the filing said.
Diesel's Italian parent, Diesel SpA, isn't part of the bankruptcy filing.