Rue21 Collapse a Warning to Retailers

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Rue21 is out of business. It had 540 stores and 4,900 employees. It said the primary reason was the spread of e-commerce across the industry. Further, it said that the trend in e-commerce had started to affect it during the COVID-19 pandemic. As Amazon and the largest online retailers in the nation grow, the question is whether Rue21 is the last victim.

Management said, “under-performing retail locations, increased industry competition and the uptick in online shopping, inflation and macroeconomic headwinds, and challenges raising capital.” Macroeconomics seems like a weak argument because the economy has been so strong. Inflation may be a good reason. Labor costs and some of the items used in clothing have a reason. Rue21 catered to teenagers. The company’s primary demographic was people between 13 and 21.

However, Rue21's teenage target does not seem like a reasonable trigger. Abercrombie & Fitch Co. ( NYSE: ANF ) shares have soared 46% this year. It is a better-known brand than Rue21 but has a similar demographic profile. However, Abercrombie & Fitch store count is modest at 729.

Among the reasons given, only e-commerce is likely to be the cause. Many retailers have faced Amazon.com Inc.'s ( NASDAQ: AMZN ) growth. It has been said that Amazon destroyed much of the bricks-and-mortar economy. Since no other argument makes sense, Rue21 may have been another chain that could not handle massive e-commerce competition.

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