Perfumania Holdings Inc., a seller of celebrity and designer perfumes and fragrances, has filed for Chapter 11 bankruptcy and said it will close some stores and become a privately held company.
The Bellport-based specialty retailer began closing 65 of its stores Monday, said company spokeswoman Jennifer Mercer. She said none of its seven Long Island stores were slated to close, and the 295 employees on the Island would not be affected.
The company’s “prepackaged” recapitalization plan should take 45 to 60 days to conclude, Mercer said. The company filed in U.S. Bankruptcy Court in the District of Delaware on Saturday.
Under the plan, Perfumania will cancel its current equity, and shareholders who sign a release form will be paid $2 per share, the company said in a release issued Saturday.
Shares of Perfumania rose 54 cents Monday, or 40.6 percent, to close at $1.87.
Bankruptcy expert Marc Hamroff, managing partner of the Garden City-based law firm Moritt Hock & Hamroff, said a prepackaged plan of reorganization generally means that a company has “negotiated with their senior creditors to reach a consensual restructuring plan before they even filed for bankruptcy protection.”
And though Hamroff said he views the time frame outlined by Mercer as “very aggressive”, he said “a prepackaged plan would certainly streamline the bankruptcy process.”
Perfumania pointed to the pressure on many stores from changing shopping habits, including online sales, in explaining the bankruptcy filing.
“Many [brick and mortar] retailers are suffering right now,” Mercer said. “Perfumania is being proactive to stay ahead of the curve, making the adjustments necessary to meet the needs of consumers while ensuring the future of the company.”
Perfumania president and chief executive Michael Katz said in the release that the move “will allow us to more quickly adapt to the shift in consumer shopping habits by focusing more of our resources on implementing our e-commerce strategy.”
The company’s Parlux and Five Star Fragrance subsidiaries are not included in the Chapter 11 filing.
Perfumania had 295 stores in October 2016, down from 320 a year earlier. The company has 1,500 employees, and approximately 195 will be affected by the store closings, Mercer said.