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Loehmann’s has been laid low — again.
The off-price clothing chain filed for Chapter 11 protection yesterday — its second go-round in bankruptcy court in 11 years — as it struggles under a crushing mound of debt and against a host of fresh competitors, from Nordstrom Rack to Gilt Groupe.
The bankruptcy is the latest casualty for Loehmann’s owner Istithmar — the Dubai-based firm whose former CEO David Jackson became notorious for shelling out lavish sums in 2006 and 2007 for ill-fated trophy investments like Barneys and the Union Square W Hotel — just as the era of easy credit was ending and the financial crisis was about to start.
Pursuing the same botched strategy that crippled Barneys, Istithmar put Loehmann’s behind the eight ball by opening too many stores in bad locations, critics said. “They took (Loehmann’s) to California and Florida — the last places that brand should have been going to,” according to Stevan Buxbaum of the Buxbaum Group, a retail consultant.
Having already moved to close several of those stores, Istithmar is nevertheless still angling to keep control of Loehmann’s. Indeed, the firm recently brushed off a “low-ball” offer for the chain from off-price rival Syms, according to a source close to the situation. Last year, Syms scooped Filene’s Basement out of bankruptcy.
“Istithmar wouldn’t even meet with (Syms’ representatives),” the source said.
Likewise, although Loehmann’s might generate bids from rivals such as Men’s Wearhouse and Century 21, Istithmar is looking to recoup its investment by making the chain profitable.
Under a restructuring plan revealed yesterday, Istithmar will continue to operate the retailer as it shells out $25 million for a 49 percent equity stake in the reorganized company. That implies a value of about $50 million for Loehmann’s — sorely short of the $300 million paid by Istithmar in July 2006.
Still, some industry insiders say a smaller, nimbler Loehmann’s will face formidable competition from increasingly powerful rivals — especially TJ Maxx owner TJX.
TJX “has become what Loehmann’s was 25 years ago,” says Mike Tesler of the consulting firm Retail Concepts. “Loehmann’s used to attract the upmarket customer and they no longer are. Those savvy customers are now going to TJ Maxx and Gilt Groupe.”
However, as Istithmar tries to revamp Loehmann’s for the second time, it will share the driver’s seat with majority debt holder Whippoorwill Associates — a respected turnaround firm whose past successful investments include an earlier stint owning Barneys.
Istithmar and Whippoorwill declined to comment.
But the two firms are “in a marriage of convenience” after clashing recently over Loehmann’s, according to a source close to the situation. james.covert@nypost.com