There will be no rescue for Scotch & Soda in Germany. The fashion brand could not find an investor, therefore all its 38 stores are destined to close, most of them by next Monday, and about 300 employees will lose their jobs.
The provisional insolvency administrator spoke about it with Melanie Gropler, editor at TextilWirtschaft, the sister publication of The SPIN OFF.
After S&S Europe, the European subsidiary of the brand in Europe, filed for insolvency in mid-June, the provisional insolvency administrator Holger Rhode initially succeeded in continuing Scotch & Soda's business operations in Germany and keeping the stores open.
However, following unsuccessful negotiations, Scotch & Soda's German retail company, based in Plange Mühle in Düsseldorf, will be wound up. As a result, almost all stores will be closed on Monday, 2 September.
The exceptions are four-to-six locations, through which Rhode wants to get sold as much of the remaining stock as possible. These remaining stores will then close by maximum the end of September 2024.
The Reasons
According to Rhode, the main reason for the end was the overall structure of the company. It was extremely complicated and confusing, according to the lawyer.
The group structure of the brand's European companies was divided between two holding companies based in the Netherlands–The Northern European retail and e-commerce organization of Scotch & Soda, and the parent company of the retail subsidiaries in Germany, Austria and Benelux.
On June 13, S&S Europe filed for insolvency due to “logistical problems” and “continuing losses.” A week later, the insolvency administrators declared the restart of the Dutch parent company a failure and, as a result, the stores in the Netherlands and Belgium closed.
The bankruptcy of the parent company also dragged its subsidiaries into the abyss. The companies in Germany and Austria also filed for insolvency at the same time as the Dutch company. According to Rhode, the holding company in the Netherlands is the main debtor.
As the parent company, it is the main licensee and is responsible for all essential services from finance to the supply of goods. It also granted sublicenses to the national companies.
However, according to Rhode, the goods never belonged to one of these companies, but they belonged to Bluestar Alliance, which took over the brand rights from Scotch & Soda in March 2023 and in turn has had the collections produced by licensees.
Therefore, Bluestar held security rights to the goods, including those that flowed to the German stores via the retail parent company in the Netherlands.
Finding a solution under these conditions was a challenge. “It was essentially about two issues, firstly the goods and secondly permission to sell under the Scotch & Soda brand,” Rhode said. “My options for action were limited.”
According to Rhode, Bluestar proved to be a tough negotiating partner. In The Netherlands, the stores had to close shortly after the application was filed because no agreement was reached with Bluestar and the insolvency administrators there. The point of contention was probably how the proceeds from the sale of the goods should be divided up.
Selling goods “to maintain a certain level of noise”
Rhode wanted to continue the business in order, as he said, “to maintain a certain level of noise on the one hand and to be able to secure the jobs of the 300 or so employees for the time being on the other,” he explained .
To this end, I have agreed on a few key points with Bluestar. “As the shareholder did not want to sell or license the Scotch & Soda brand rights, we only negotiated about the merchandise,” Rhode said. The result was that the existing merchandise can be sold in the stores,” he said.
The business model of the US company is based upon several own fashion brands including Hurley International, and also manages a portfolio of over 400 licensees.
The provisional insolvency administrator plans to sell off the remaining stock in four to six stores that are doing well over the next few weeks and the Scotch & Soda stores in Germany will finally be closed at the end of September.
Could there be a new start?
Apparently, the stores could start hosting some new activity. In an interview with TW that appeared in July, Joseph Gabbay, CEO, Bluestar, indicated that five new stores were planned to open in Germany, and also planned to open additional stores with new retail management. However, he did not reveal when or with whom.
It was only recently announced that there are new partners for the brand in Belgium and Austria. New stores are to be opened this year, it was reported. There has also been a new partner for the e-commerce business in Europe since the end of June.
Bluestar also operates under license here with United Legwear & Apparel Europe BV, the worldwide licensee for Scotch & Soda Men's, Kids and Accessories as well as licensee for other global brands of the group such as Hurley, offering surfwear for men, and Skechers socks for Europe. Could these brands be these stores' next guests?
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