Century 21 was Felled by Several Factors

Key Insights:The inability of Century 21 to get its insurers to compensate for the loss of business was a key factor.Competition in off-price is fierce as department stores embrace the strategy and brands look to liquidate excess inventory. Earlier this month Century 21, long a bastion of off-price shopping in New York, filed for bankruptcy protection, joining the ranks of storied retailers felled by Covid-19 such as Neiman Marcus and Brooks Brothers. The main culprit was the pandemic, especially because of the discounter's presence in New York, where stores were closed for several months and tourists disappeared, while having some of the highest rents in the U.S., according to Andrea Weiss, CEO of retail consulting network The O Alliance. But there are other reasons for its downfall. For New York residents and tourists alike, it’s another sad chapter in the city’s retail history. Rummaging through Century 21’s piles of designer clothing was a rite of passage for the aspiring fashionista, where mere mortals could nab European luxury labels such as Versace, Dolce & Gabbana and Armani at steep discounts. The city has already lost a number of banners that attained cult status this year alone, including luxury retailer Barneys New York and gourmet food purveyor Dean & DeLuca’s flagship store in the SoHo neighborhood, both of which filed for bankruptcy within the past 12 months. While grocer Fairway Market filed for Chapter 11 earlier this year, it found a buyer willing to take on the brand and a handful of locations, including its famed Upper West Side store. For Century 21, all 15 stores are in the process of conducting going-out-of-business sales, including its downtown flagship that bordered the World Trade Center. Beginning with that downtown New York City store, Century 21 was a boutique off-price specialty retailer where one could shop for "that incredible designer dress," noted Weiss. "Since 1961, when Al and Sonny Gindi opened what was then a small store in downtown Manhattan, we have been proud to provide shoppers with unmatched access to designer brands at amazing prices," said Century 21 co-CEO IG Gindi in a statement. "While we wish that Century 21 could continue to be a must-see shopping destination for so many, we are proud of the pioneering role it has played in off-price retail and the iconic brand it has become." The department store chain had hoped to collect insurance money in light of the pandemic, citing $175 million due under policies the company thought protected it from business interruptions similar to when the neighboring World Trade Center towers fell on Sept. 11, 2001. But that prospect is in doubt. "While insurance money helped us to rebuild after suffering the devastating impact of 9/11, we now have no viable alternative but to begin the closure of our beloved family business because our insurers, to whom we have paid significant premiums every year for protection against unforeseen circumstances like we are experiencing today, have turned their backs on us at this most critical time," said co-CEO Raymond Gindi in a statement. Nevertheless, the bankruptcy of Century 21 raises a number of questions about the relevance of stores like it: regional off-price chains. Beyond the factor of Covid-19, it existed in an increasingly competitive subsector that includes TJMaxx and Burlington Coat Factory. It’s at least the third off-price retailer to file this year, following regional chains such as Tuesday Morning and Stage Stores. Seeing the success of TJMaxx, the banner decided to go head-to-head with the national discounter in the New York metro region, but that may have played a part in its undoing, Weiss said. For a chain such as Century 21, it may have been difficult to find enough high fashion inventory to support multiple locations and remain distinctive, where the main appeal was finding that elusive European luxury label rather than the perfectly fine, but also fairly ubiquitous, American brands available at TJMaxx, she explained. Indeed, at Century 21’s newer locations such as at New York's Lincoln Center, the line between it and other discounters was increasingly blurred. Not to mention the fact that most apparel retailers are essentially off-price these days, heavily discounting fashion-forward merchandise to reduce a glut of inventory and lure shoppers, said Steve Dennis, president and founder of SageBerry Consulting. As Weiss rhetorically asked: "Is Macy's now off-price?" Even before the outbreak, department stores were in the mode of conducting a neverending sequence of promotional events throughout the year, Dennis said. But in Century 21's case, it didn’t have the deep pockets of larger retailers such as Macy’s that, while experiencing steep sales declines, were able to raise the necessary capital to stay in business. It may also be the latest example of a retail concept that, while successful in New York, failed to translate elsewhere as its owners attempted to expand it beyond the city's borders, as in the cases of Barneys and Fairway. "What made them remarkable is harder at a larger scale," Dennis said. The bottom line was that with no insurance money, a weak balance sheet and landlords wanting to get paid, for Century 21 to survive in its current state it would need a buyer or white knight. But with competition for the off-price consumer heating up and few ways for the retailer to distinguish itself, that is unlikely.

Life After Lockdown

Century 21's Bankruptcy Shows the Limits of Off-Price, New York-Exclusive Categories

The famed retailer is following in the steps of Barneys, Dean & DeLuca and Stage Stores

Richard Collings

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Richard Collings