Los Angeles Business Journal

Nasty Gal Retailer Files for Chapter 11 Bankruptcy

By Hayley Fox Thursday, November 10, 2016

Nasty Gal Inc., an online fashion retailer that recently launched a chain of brick-and-mortar stores in L.A., filed for Chapter 11 bankruptcy on Wednesday citing an effort to restructure its balance sheet and “position the company for the future.”

“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,” said Sheree Waterson, chief executive of Nasty Gal, in a statement.

Nasty Gal has been considering strategic partnerships with other brands and is currently looking to take on a new equity partner or sponsor. The company’s founder, Sophia Amoruso, has become a brand herself in recent years, writing two books, hosting a podcast, creating the #GIRLBOSS foundation and serving as executive producer on an upcoming Netflix series based on her life.

Amoruso founded Nasty Gal in 2008 from a business she built on eBay selling vintage clothes. Now the company not only sells high-end vintage, but contemporary items under Nasty Gal’s own label. The retailer saw explosive success in the last few years, consistently growing in sales and revenue. Just this year, Amoruso was named one of Forbes “60 Richest, Most Successful Self-Made Women in America.” In fiscal year ending Jan. 31, 2015, Nasty Gal had a net revenue of $85 million, according to court documents.

“Nasty Gal experienced difficulties, however, in managing its business to keep pace with this incredible growth, including adjusting its product mix and merchandise offerings for a booming customer base and developing internal systems to manage and control the business,” according to the declaration for emergency relief.

International sales for the company have dropped off, and about 87 percent of the company’s revenues come from online sales; the rest comes from the retail store locations in Santa Monica and West Hollywood.

The court documents filed this week outline a bumpy recent history for Nasty Gal, which includes receiving $4 million in equity financing from the Stamos + Johnson Fund and a $15 million loan from Hercules Technology Growth Capital, Inc. The company also currently owes more than $80,000 in payroll and more than $329,000 in paid time-off.

Nasty Gal faces more than financial troubles though. Since 2015, the company has been hit with multiple lawsuits from former employees who claimed they were fired unjustly; some for becoming pregnant or seriously ill.

Legal reporter Hayley Fox can be reached at hfox@labusinessjournal.com. Follow Follow her on Twitter at @EPFox.