Nasty Gal is expected to file for bankruptcy

According to sources close to the situation, Nasty Gal is preparing to file for Chapter 11 bankruptcy protection, allowing it to reorganize its business.

In addition, said sources, founder Sophia Amoruso is resigning as executive chairwoman. The hip online clothing seller, aimed at fashion-forward young women for whom Amoruso had become a heroine, is telling its employees today and will be filing publicly soon. Sources added that director Danny Rimer is also expected to step down from the board.

Amoruso’s departure caps what has been a tumultuous two years at the onetime e-commerce darling. Nasty Gal has conducted layoffs both this year and last, gone through a CEO change, and been the target of lawsuits by several former employees. Nasty Gal has also explored a sale of the company, said sources.

Amoruso founded Nasty Gal in 2006, when she was only 22, as a vintage shop on eBay. Over the years, she grew the Los Angeles-based company into an online business with around $100 million in sales. It was fueled by a passionate customer base among millennial women and a personal fan base, thanks in part to her New York Times bestseller “#Girlboss.” The company also operates two stores in the Los Angeles area.

Nasty Gal has been largely funded by Index Ventures, which put $49 million into the company in 2012. But in February of 2015, well-known retail exec Ron Johnson added $16 million to the mix. Sources said that he and private equity partners have been trying to add more funding in exchange for what could be a cram-down of existing investors.

Obviously, that did not work in what one person with knowledge of the situation called a “too-little-too-late scenario.”

More to come as this story develops. Nasty Gal could do anything from shedding its stores and warehouses to cutting back on staff, but that is still undetermined, said sources.

Recode has contacted Amoruso, Johnson and Rimer for comment.

(And it goes without saying that while it’s a bad day for Nasty Gal, it is also one for Nasty Women all over.)


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