Online retailer Nasty Gal files for bankruptcy and seeks loans to continue ops

nasty gal bankruptcy

Nasty gal bankruptcy, the online fashion site founded by Sophia Amoruso files for bankruptcy

After celebrating a decade of operations online, retailer Nasty Gal created by entrepreneur Sophia Amoruso has filed for Chapter 11 bankruptcy protection following disappointing sales in recent months.

The shift in sales for NastyGal can be attributed to a number of sources including the fact that Millennials seek more than just fast-fashion, plus the increased retail price of the Nasty Gal clothing and an increase in competitors as the online retail space grows daily.

Amoruso will step down as the executive chairman of the company, a position she acquired in early 2015 after stepping down as CEO handing off the position to Sheree Waterson. Prior to joining the Nasty Gal team Waterson was the chief product officer at Lululemon.

The bankruptcy filing is an attempt to balance out the company debts and structure. “Our decision to initiate a court-supervised restructuring will enable us to address our immediate liquidity issues, restructure our balance sheet and correct structural issues including reducing our high occupancy costs and restoring compliance with our debt covenants,” Sheree Waterson said in a statement to WWD. “We expect to maintain our high level of customer service and emerge stronger and even better able to deliver the product and experience that our customers expect and that we take pride in bringing to market.”

Lawyers for failed online fashion retailer Nasty Gal have asked for a hearing to weigh in on multiple emergency motions filed in court Thursday, reports WWD.

The company, which filed its petition for bankruptcy in Central District Court in California on Wednesday, wants court approval to tap a loan from Hercules Technology Growth Capital, in order to keep the business running and, at least in the short term, be able to make its next payroll on November 25.

The payroll expense totals $512,000 across 189 workers, and there’s also the roughly $400,000 it spends weekly on merchandise to stock its online store and two physical shops on Melrose Avenue and Third Street Promenade.

Without court approval for use of the funds, the company would be unable to continue operations, forcing a liquidation that would likely generate about $10m, according to a declaration filed in court by chief restructuring officer Joe Scirocco. The executive was tapped in September to help Nasty Gal with a possible recapitalisation, merger or sale.

Scirocco valued the business, if allowed to continue operations, at about $25m.

Efforts to sell the business have been hampered by what Scirocco said in his declaration was a “complex capital structure, significant ageing of Nasty Gal’s existing accounts payable, strained vendor relationships that have disrupted the normal flow of merchandise and the need to further right-size its staff and facilities.”


Nasty women unite. Tees and totes are now live, link in bio. #nastywoman

A photo posted by Nasty Gal (@nastygal) on

A silver lining in the online retailers’ financial issues-Amoruso released her sophomore book Nasty Galaxy  in early October 2016, following her New York Times best seller #GIRLBOSS which is dubbed as an inspiring book for millennial females looking to take control of their personal and professional lives. The book explores her personal successes and failures throughout her life as a boss and the current period in the companys life-span is no exception. The entrepreneur has teamed up for a second capsule collection with Courtney Love.


And finally, Amoruso also has a Netflix comedy series, Girlboss expected to debut in 2017 about her early life recounting her start-up from living in a van to re-selling clothing on e-bay in the MySpace era and creating her online store. The fate of the two Nasty Gal California brick-and-mortar stores is unclear regarding the Nasty Gal bankruptcy announcement.

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