Retail Sales Slump, Even in Paradise

Hawaii’s Hilo Hattie stores have filed for bankruptcy with the hope of surviving as one of the island’s popular spots for tourists to buy travel trinkets and souvenirs.

The struggling chain, which recently closed three of its seven stores, filed for bankruptcy protection on Thursday with $2.2 million worth of inventory. That inventory includes the quintessential Hawaiian floral-printed shirt, generously draping muumuus and an array of macadamia nut-inspired things like this tin of vanilla/macadamia nut-flavored cigars. (The clothing section even sells matching apparel sets so everyone in the family can coordinate with the same print!)

In documents filed in U.S. Bankruptcy Court in Honolulu, Chief Operating Officer Mark Storfer blamed the company’s problems on slow sales. In the company’s most recent fiscal year, it sold about $15.6 million worth of products—down from $23.6 million the year before.

The retailer has begun to face collection and eviction actions “against which the [company] does not have a viable defense,” Mr. Storfer said.

The retailer has already downsized once in a 2008 bankruptcy after it became “financially and operationally over-extended” from aggressively opening new stores in Guam and in mainland U.S.

The new stores didn’t make money, and many closed. And amid the struggle, the company stopped making its own products and bought more stuff from overseas suppliers to cut costs, Mr. Storfer said in court papers.

“This strategy led to a loss of the [company’s] reputation for high-quality, Hawaiian-made products and led to a decline in average purchase per customer,” he said.

Even after the chain’s debts were reduced and it got a new owner, Donald B.S. Kang, the owner of Royal Hawaiian Creations, some of its stores have continued to struggle. Filing for bankruptcy will stop the recent collection attempts and give the company time to figure out how to repay its more than $10 million worth of debt.

Founded in the 1960s, the company has grown to employ more than 100 people. Its flagship store in Oahu is still open.

Write to Katy Stech at [email protected]. Follow her on Twitter at @KatyStech