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Bruno Magli’s U.S. Unit Files Chap. 11

The U.S. arm of Italian Bruno Magli filed for bankruptcy court protection Wednesday, citing liquidity problems and losses stemming from several of its stores.

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A Bruno Magli boot

A Bruno Magli boot.

Photo By WWD Staff

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NEW YORK — The U.S. arm of Italian firm Bruno Magli SpA filed for bankruptcy court protection on Wednesday, a victim of liquidity problems and losses stemming from the operation of certain store sites.

Opera, the Bulgari-backed investment fund, bought a controlling stake in Bruno Magli SpA in 2001. U.S. sales account for 50 percent of the company’s estimated $82 million in total annual sales, according to Aaron Schwartz, president of Bruno Magli North America.

The Chapter 11 petitions for three related entities — BM USA Inc., Uomo Magli Texas Inc. and Donna Magli Texas Inc. — were filed in a bankruptcy court in Plano, Tex. The filing affects U.S. retail operations only and is not expected to impact either the wholesale or international businesses.

According to court papers, all three entities are operated by the same corporate parent, Bruno Magli SpA, which owns an 87 percent stake in BM USA. Donna Magli and Uomo Magli are wholly owned subsidiaries of BM USA. The cases are expected to be consolidated under the Donna Magli case file.

As a result of the filing, the firm has shuttered four of its seven U.S. stores, including a three-level 5,000-square-foot unit at 789 Madison Avenue here, which opened last June. The other three boutiques shut down are South Coast Plaza in Costa Mesa, Calif., Short Hills Mall in Short Hills, N.J., and a shop at 677 Fifth Avenue here.

Asked if there are plans to shut down the remaining three retail locations, Schwartz said, “At this time we don’t anticipate it. But certainly with the provisions that were allowed under the reorganization plan, we’ll take the time to strategically evaluate each location.”

Court documents said that, shortly after entering into some of the lease agreements, the firm encountered liquidity problems, with the four shuttered unprofitable locations each costing the company between “$1 million to $2.5 million per year simply to operate.”

The firm said in court papers that it lost $2.5 million in 2003 just from the operation of the store on Fifth Avenue. That lease was for space in the basement, ground and second floors. The Madison Avenue store lost $1.9 million last year, while South Coast Plaza lost $1.4 million. The Short Hills store lost $1.2 million last year.
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Though Schwartz said there will be no changes to the product categories, industry sources close to the company said the brand plans to discontinue its recently launched handbag line and small leather apparel collection to focus on footwear.

To strengthen its U.S. business, the Italian firm has restructured its U.S. division and made a series of executive appointments.

Schwartz, previously vice president of Bruno Magli, was promoted to president of Bruno Magli North America. He will be responsible for the operations of the wholesale and retail businesses, including but not limited to the distribution, marketing, sales, planning, operations, business development and finance for the North American market. As vice president and director, Schwartz oversaw the firm’s retail and women’s wholesale divisions. Prior to Schwartz’s appointment, Bruno Magli SpA chief executive officer Luca Ramella also acted as president of the North American division.

Chief financial officer James Mullaney has added the title of executive vice president. He is responsible for all financial operations, logistics and information technology. Mullaney also serves on the company’s board. Prior to joining Bruno Magli, Mullaney was the director of finance for Henri Bendel, a division of Limited Brands Inc.

Scott Prentice, who was vice president of the men’s division, has been promoted to senior vice president of the same division.

Managing director Alexander Zschokke will leave his post in July and not be replaced.

According to court records, top unsecured creditors range from Italian firms holding trade claims to advertising entities and landlords. One of the top unsecured creditors is Peter Grueterich of Greenwich, Conn., who holds a $2 million employment claim. Advertising claims include $68,000 owed to Hearst Magazines and $62,966 owed to Advance Magazine Group, parent company of WWD. In Style magazine holds a $50,000 claim and C&M Media has an $11,729 claim.

The firm gained publicity during the O.J. Simpson trial in 1995, when it was discovered that Simpson was wearing Bruno Magli shoes on the night he was accused of killing his ex-wife, Nicole Brown Simpson. He was acquitted. At the time, Bruno Magli officials acknowledged that the trial boosted the brand’s popularity, but after all the hype, the brand sought a lower profile.