Retailer TNG is the 3rd traditional chain to file for bankruptcy protection.

Within three weeks, Cavalera and Lepostiche resorted to this expedient.

The TNG fashion chain, owned by businessman Tito Bessa Jr., filed for bankruptcy protection on Friday night in São Paulo. The request was submitted to the court after attempts to renegotiate debts of approximately R$ 260 million – more than half of which are with banks and shopping centers – ultimately failed. The company had already felt the effects of the 2015 and 2016 recession, but the drop in sales after 2020 worsened its results.

In just three weeks, Le Postiche, Cavalera, and TNG filed for bankruptcy protection. Since the beginning of the pandemic, this is the largest number of filings among traditional retail brands in less than a month.

There are signs that the gradual recovery in apparel sales since April has particularly benefited leading chains in the sector, with access to cash and greater scale, which increases consolidation in this market. Other retailers have not been able to weather new activity restrictions in this second wave of COVID-19.

“Out of a total of 400 days [since the beginning of the store closures due to the pandemic], we worked 200 days. How can you work like that? Impossible. We know we need one or two years of breathing room, that's the time I need. Six months alone wasn't enough for us to recover. It's a reconstruction, a fresh start,” says Bessa Jr., from TNG.

"Judicial reorganization doesn't work when you file for it at the wrong time, which isn't our case. We're filing under conditions that allow us to get out of this situation, seeking more time to renegotiate our debts and focus solely on the business."

TNG was founded 37 years ago. Bessa Jr. became the controlling shareholder by buying his brother's stake in the business in 1999. In 2019, the chain had just under 170 stores, and has closed 60 since the start of the pandemic. It laid off around 600 people in an attempt to balance the books.

The retailer once had annual revenues of R$ 400 million years ago. In 2020, revenue totaled approximately R$ 150 million, with a 30% drop in sales at stores that had been operating for more than a year, and it began 2021 with a decline of 25% to 30%. The fashion sector was one of the most affected by the pandemic, due to operational disruptions and deferred consumption, as it was not considered essential during times of crisis.

Lawyers have stated that there are debt maturities incurred by the chains to cope with the 2020 crisis, and without economic recovery, due to the slow pace of vaccination, the chains have been unable to meet their obligations. Retail consultants also highlight management problems within the chains (in the case of Cavalera, a shareholder dispute was a factor) and the previous years of recession as responsible for the difficulties.

The consulting firm that had been working with TNG for a year, and continues in the restructuring, is Siegen, and Moraes Jr. is the company's law firm. “I continue to run the network; I am the executive and I will be in charge. We have an eviction lawsuit against a shopping mall, renegotiations to handle with banks, but now with the protection, we can talk,” says Bessa Jr.

Reproduction of a news report from the Valor Econômico website.