Kiko USA files for Chapter 11 bankruptcy, announces nationwide store closures

By

Robin Driver

Published
Jan 16, 2018

Kiko USA, Inc., the American subsidiary of Italian cosmetics company Kiko S.p.A., filed for Chapter 11 bankruptcy last Thursday, and will be closing almost all of its remaining stores. The brand has blamed weak sales for its recent struggles.

24 out of 29 of the company’s domestic stores will be shut in an effort to bring the brand back from the brink. The five remaining stores are strategically located in New York, Miami, Los Angeles and Las Vegas.
 
As part of its Chapter 11 bankruptcy filing, Kiko USA also announced a new strategic plan, committing to refocusing on product assortment, enhancing customer experience and optimizing targeted marketing, as well as growing the company’s e-commerce site, which continues to show promising results.

In a court filing, Frank Furlow, CEO of Kiko USA, cited “unpredictable industry-wide market challenges in brick and mortar retail locations” as the main reason for the company’s financial difficulties, claiming that a combination of factors, including decreasing in-store footfall and high rents, had “led to extremely high operating costs and continually depressed profits in recent years.”
 
The reasons cited for the company’s financial tribulations fit into current retail trends, with brick-and-mortar stores facing tough competition from online retailers. Generally, however, cosmetics retailers are faring comparatively well in this challenging new environment.
 
Ulta, for example, reported a 63% increase in its online sales in Q3 2017, while other retailers are adapting well to increasing demands for consumer experiences and service customization. In September of last year, Sephora was announced as the brand offering the most personalized consumer experience of any US retailer, and has also gained a reputation for its in-store events.
 
With this in mind, the main points of Kiko USA’s new strategic plan, which promises to recenter on e-commerce and invest in customer experience, seem to be well researched.

Percassi Group-owned Kiko, which currently operates some 1,000 stores in 21 countries, has been quick to point out that the financial difficulties plaguing its American arm do no reflect its otherwise robust international business. 
 
Kiko USA plans to vacate the premises of the 24 stores slated for closure by February 28.