Hilo Hattie has decided to close its flagship store in Iwilei after unfruitful efforts to maintain a smaller operation at the location on Nimitz Highway as the 52-year-old kamaaina retailer works to emerge from bankruptcy by year’s end.
A closing date hasn’t been determined yet, but is expected to be before Dec. 31, according to Anna Covert, a principal with the retailer’s marketing partner Wind On Water Communications.
The future of the flagship store had been uncertain since February, when Hilo Hattie filed bankruptcy and entertained selling its lease for the Nimitz property to generate cash and pay off some debts.
The store’s landlord, an affiliate of the nonprofit Harry & Jeanette Weinberg Foundation, was the only bidder at an auction for the lease last month. The foundation agreed on a price of $5.1 million, of which it will keep $1 million to satisfy delinquent rent. The foundation was owed $2.5 million in back rent and is forgoing $1.5 million. The balance of the purchase price, $4.1 million, will go to pay Hilo Hattie bankruptcy expenses and other creditors.
Hilo Hattie uses only 33,000 square feet of the 87,000-square-foot building for retail sales. Much of the remainder once housed manufacturing operations that were outsourced several years ago.
Covert said Hilo Hattie tried to find co-tenants to share the space and attracted some interest, though the effort wasn’t successful. “We did look,” she said. “We just couldn’t find the right tenant.”
Another factor in the decision was Hilo Hattie’s unattractive model of busing visitors to the store from Waikiki, which created a transportation expense. “The warehouse model just hasn’t been effective for the last few years,” Covert said.
The closure will mean job losses, though Covert couldn’t say how many. Some workers are being offered positions at the company’s store at Ala Moana Center. Hilo Hattie also operates stores on Kauai and Maui.
Hilo Hattie hopes to find a location at which to open another store in Honolulu, preferably in Waikiki.
Earlier this month, Donald Kang, owner and CEO of Hilo Hattie, announced in a news release that the company’s Chapter 11 restructuring plan should lead to profitability next year.
Hilo Hattie’s bankruptcy filing in February listed $8.1 million in assets and $13.2 million in debts. Shortly before the filing, the company closed three stores — in Kihei, Maui, and in Kona and Hilo — cutting the number of employees to 109 from 169.
Besides selling the Nimitz store lease, which had been a financial drain on the retailer, the company is renewing its focus on uniform and wholesale operations and is building a new website to improve online sales. Designing and manufacturing exclusive apparel prints will also continue.
“We’re confident Hilo Hattie will be emerging as a stronger company and one that is much better able to compete in today’s marketplace,” Kang said in the announcement.
