Betsey Johnson files for bankruptcy

Nancy Marshall-Genzer Apr 27, 2012

David Brancaccio: The fashion designer Betsey Johnson has filed for bankruptcy protection. Dozens of the fashion designers’ stores will close, and hundred of employees will be laid off.

Marketplace’s Nancy Marshall Genzer joins us now, live. Good morning.

Nancy Marshall-Genzer: Hey David.

Brancaccio: What forced this bankruptcy?

Marshall-Genzer: Like a lot of companies, It was due, in part to the recession. But Betsey Johnson is different. She’s known for really fun, colorful clothes. Dresses with big polka dots, or big shirts over leggings. She was really big in the 80s and 90s. But sales are down by more than 20 percent since 2007. Of course, part of that was due to the economy. But, she also never really updated her look.

Brancaccio: So, how difficult is it for high-end fashion houses like Betsy Johnson to stay afloat when the economy is down?

Marshall-Genzer: Well David, that’s the thing. Betsey Johnson isn’t xx. Those super high end designers can still make money in this economy. Because high income consumers are still spending. But designers like Betsey Johnson, who aren’t at the highest end, have struggled. Their shoppers are pinching pennies a bit more.

Listen to what Ken Perkins, of Retail Metrics, has to say about that.

Ken Perkins: The middle income consumer is really struggling to stay afloat and they haven’t had a lot of discretionary income at their disposal. So something really has to really sort of grab their attention in order for them to go out and pull the trigger and make the purchase.

Brancaccio: So what could Betsey Johnson have done to survive?

Marshall-Genzer: Like I said, David you need to update and evolve. But not just keep up with fashion trends, but also keep up with trends in the economy.

Alison Jatlow Levy is a retail strategist at Kurt Salmon. She told me designers have to follow the the lead of the woman who’s buying their clothes.

Alison Jatlow Levy: Maybe she’s not buying clothes and ready to wear. Should we shift the mix into handbags or footwear or what is she buying. And really understanding who that customer is, is very important as times get tough.

And Betsey Johnson isn’t just a label. The designer has lived through some tough times already. She’ll be 70 this year. But you’d never know it. She still does cartwheels at the end of her fashion shows. So don’t count her out just yet. Remember this is just a filing for bankruptcy protection. It’s a chance for Betsey Johnson to reorganize her company. And apparently her clothes will still be available at stores like Bloomingdales.

Brancaccio: Marketplace’s Nancy Marshall-Genzer reporting from Washington. Thank you very much.

Marshall-Genzer: Oh, you’re welcome.

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