Betsey Johnson Bankruptcy

By now, you've read the news about Betsey Johnson, right? (click here).


The article says that "... the Betsey Johnson brand is stronger than ever."


If you want to have a fun little exercise, go ahead and pull the interest on your debt from your profit and loss statement.  Are you now generating 10% EBIT, 10% pre-tax profit?  How different is the p&l pre/post interest?  More important, what was the sales increase associated with the debt you took on?


It is my opinion that brand health is best measured in terms of quality profit and cash flow, ask Apple, for instance.


Remember the ridiculous "multi-channel era", aka 2001 - The Great Recession?  We were taught that we had to pile on debt in order to provide a superior "bricks 'n clicks" experience, right?  How is that working out for anybody but the folks who loaned money?  Sure, there are success stories ... but only when there are consistent and healthy increases in comp store sales (look at Nordstrom sometime ... healthy comp store sales increases but a ton of debt, too).


These days, there are major differences in strategy.

1. Retail:  Tack on a bunch of debt, open some stores, and cross your fingers.
2. Catalog:  Pay co-ops for names prior to mailing a catalog.
3. Online:  Pay Google for clicks prior to selling something.

And then there are all of those new businesses ... the Fab.coms of the world, who build an email list and social following ... for free.  Now, whether they can monetize those lists effectively over time is debatable, but it's sure worth paying attention to, right?

The biggest trend of the past few years seems to be this battle ... pay-to-play vs. giving a customer a reason to pay attention.  Both strategies work, and both have risks.  But if your brand is "stronger than ever", then what purpose did all of that debt serve?