Teen retailer, dELiA*s, Inc. (NASDAQ:DLIA) has announced that the company will be filing for Chapter 11 bankruptcy protection, and additionally, liquidating inventory and assets to raise capital. dELiA*s has been searching for a buyer for the company for some time, but failed to find any interested parties that were willing to take on dELiA*s problems. Shares of dELiA*s collapsed -83.75% today, to $.0019 per share.
dELiA*s experiencing issues with sales
Seth Klarman: Don’t Underestimate The Power Of Uncertainty
Since founding his investment partnership in 1983, Seth Klarman has offered a stream of wise and timeless commentary on markets and the craft of investing. His commentary from periods of market volatility is incredibly insightful. Klarman's letters to clients around the time of the dot-com bubble and financial crisis in 2008/09 contained timeless insights on Read More
dELiA*s, Inc. (NASDAQ:DLIA) has been in trouble for some time now, however, as the company has failed to turn a profit in the last five years. Same store sales continued to disappoint and online sales were scarce and non-impactful. While management did say that they were approached back in September regarding a merger, acquisition, debt, and equity financing deals, but none were able to be finalized. Now, dELiA*s will be starting purely from scratch, as the company looks to sell every piece of inventory, close all stores, stop online store sales, and close distribution centers.
Sales, quarter over quarter, dove -22.60%, and earnings per share managed to rise 40% during the same period. However, sales the past five years are down -8.70% and earnings per share the past five years came in at -25.60%. dELiA*s had no cash, with cash per share ratio of only .04 and total debt to equity of .14. Obviously, dELiA*s, Inc. (NASDAQ:DLIA) did not have enough cash to cover its debt payments and that is why they are now entering bankruptcy. Short sellers have been in tune with the disaster at dELiA*s, with a short float of 19.80%.
dELiA*s failed to impress customers
Ultimately, operating a successful clothing and accessory store catering toward teenage girls, is a tough business and market to win over. Fashion trend change amongst teenagers and lacking to innovate and try to create new markets, dELiA*s was just trying to chase their customers. The plan backfired, as dELiA*s could not connect with their customers and deliver a product that would have decent demand. Even some of the top retailers in the same industry go through periods of boom and bust, because it is a volatile market that is economically sensitive. Relying on a teenage market is a relatively small niche that is dominated by some very large companies.
Even, Abercrombie & Fitch Co. (NYSE:ANF) appeared to be on their way to bankruptcy only a few years ago and they were huge amongst teenagers a few years ago. The bottom line here is that dELiA*s, Inc. (NASDAQ:DLIA) was trying to tap into a small niche that they did not understand and therefore, could not compete in. It will be interesting to see what direction the company goes in now, after they plan to liquidate everything and start fresh.
Whitney Tilson was once a large shareholder of the company, but he sold out in late 2013.