Dive Brief:
- Following a rapid direct-to-consumer expansion, lifestyle fashion brand Scotch & Soda filed for bankruptcy on Monday in its home country, the Netherlands, according to a statement shared with Retail Dive.
- The decision does not impact the brand’s businesses outside the Netherlands, per the statement. The company is looking for a buyer and its 32 stores across the country will remain open for the foreseeable future.
- Scotch & Soda attributed the decision to a variety of causes that created a cash flow deficit, including a decline in consumer confidence and COVID-19 pandemic-related lockdowns in the country.
Dive Insight:
Despite the brand saying it has seen record sales, macroeconomic and geopolitical pressures weighed on Scotch & Soda.
“This decision to file for bankruptcy became unavoidable following a chain of events that accelerated severe cash flow issues. Although Scotch & Soda outcompeted the market with record revenues of €342.5 million in FY 21/22, the Covid crisis affected its business performance and financial health negatively for two years,” the brand said in its statement. “This was then followed by the large drop in consumer confidence due to the war in Ukraine, the resulting energy crisis and the high inflation rates that followed. This again contributed to severe cash flow issues with which the company has been struggling since June last year and which required ongoing support from its lenders and shareholder.”
With its current shareholder and lenders unable to help the brand more, Scotch & Soda decided to move forward with bankruptcy.
Over the past few years, Scotch & Soda has been rapidly expanding its brick-and-mortar presence — a shift from its roots of originally being a wholesale brand. In October 2021, the company said it planned to open 22 physical locations that year, two of which were in the U.S. and overall included 7 shop-in-shops. And in April 2022, the brand announced plans to open another 20 stores over the course of six months. The company says it has 246 freestanding stores globally, per its website.
Brands across the retail industry have been working to find an ideal balance with brick-and-mortar stores, leaving some to open new locations while others wind down. Allbirds announced a strategic transformation plan earlier this month amid declining net revenue, which includes scaling back its store expansion plans by opening just three new locations compared to 19 in 2022.
Meanwhile, DTC apparel brand Buck Mason opened its first store this month in Chicago. Adding to its 200 existing locations, eyewear company Warby Parker in February said it plans to open 40 new stores in mostly suburban areas in 2023.
