Restructuring the Runway: How Chapter 11 363 Sales Are Reshaping Fashion and Beauty

Recent Chapter 11 bankruptcy filings by Saks Global Holdings, LLC on January 13, 2026, and Eddie Bauer LLC on February 9, 2026, underscore the continued financial stress facing companies across the fashion and beauty sector. Consumer inflation, financial uncertainty, reduced discretionary spending, tariff exposure, inventory and supply chain disruptions, shifts in customer behavior driven by the growth of ecommerce, and higher borrowing costs have placed sustained pressure on traditional operating models. As these challenges intensify, distressed brands are increasingly turning to court‑supervised asset sales under Section 363 to monetize intellectual property and going-concern value, streamline operations, and facilitate ownership transitions. In the past year alone, multiple well‑known fashion and beauty companies have pursued or completed Section 363 transactions as part of broader restructuring efforts.

Why 363 Sales Remain Attractive for Fashion and Beauty Debtors

Section 363 of the Bankruptcy Code allows a debtor, after notice and court approval, to sell assets outside the ordinary course of business, free and clear of liens, claims, and encumbrances. This restructuring structure allows a buyer to start the company anew with a clean balance sheet and new financing, free from many legacy debts and obligations. The buyer retains broad discretion to select the assets it wishes to purchase, assume only those contracts and leases necessary or desired to operate the business, and leave behind assets, leases, and obligations deemed unprofitable or otherwise undesirable within the bankrupt seller entity.

For fashion and beauty companies, whose value is often concentrated in brand equity, trademarks, proprietary formulas, and customer relationships, a Section 363 sale process offers a path to preserve core assets and value even when the operating business is over‑levered or burdened by unfavorable leases or prior trade or other debt. The ability to cleanse assets through a court order continues to attract both strategic buyers and financial sponsors seeking to redeploy established brands with reduced risk.

Section 363 transactions also align closely with the industry’s emphasis on speed and continuity. Traditional Chapter 11 plan‑based exits can require lengthy court approval periods, creditor solicitations and voting requirements, and multiple statutory confirmation standards before a company can emerge from bankruptcy. These factors can increase execution risk, elevate costs, and undermine acquiror or investor confidence in financing a go‑forward business. By contrast, Section 363 sales can often be completed quickly and early in a case, and the standard for bankruptcy court approval of such a sale is comparatively streamlined and debtor-friendly, requiring a showing that the transaction represents a sound exercise of the debtor’s reasonable business judgment.

The speed and decreased execution risk of a Section 363 sale can significantly limit disruption to supply chains, licensing arrangements, and consumer goodwill. This consideration is particularly important for beauty brands and fashion labels, whose market relevance, financing sources, and supplier relationships can erode quickly during prolonged insolvency proceedings.

Recent Examples from the Fashion and Beauty Sector

One of the most prominent recent examples is the Avon Products transaction, where a Chapter 11 filing led to a court‑approved sale process for substantially all assets of the international beauty business. The case illustrates how Section 363 sales can be structured alongside negotiated settlements among debtors, lenders, and creditor committees to achieve a going‑concern transfer while resolving intercompany and legacy claim issues. This approach preserved brand continuity across global markets while allowing the bankruptcy estates to proceed toward liquidation of remaining assets.

Beyond Avon, a steady pipeline of fashion and beauty companies has entered Chapter 11 with the stated intent to pursue asset sales. In its recently filed Chapter 11 case, Eddie Bauer LLC proposed a Section 363 sale aimed to maximize value by selling desirable store locations. The watch distributor and fashion brand licensee E. Gluck also recently obtained an order of a Bankruptcy Court approving a Section 363 sale of certain critical assets to support the continuation of its business after suffering liquidity and debt issues. These cases span fashion and accessories, beauty, mid‑market apparel, and specialty retail, reinforcing that distress is not confined to any single segment. Many such filings pursue dual‑track processes, where debtors market assets while simultaneously evaluating plan alternatives, with Section 363 sales often emerging as the most practical and value-preserving outcome.

Emerging Themes in Fashion and Beauty Section 363 Transactions

Several consistent themes have emerged across recent Section 363 transactions in the fashion and beauty sector.

Intellectual Property as the Primary Value Driver

Intellectual property is frequently the primary source of value. Buyers are often less inclined to assume expansive brick‑and‑mortar footprints or long‑term lease obligations, and are more focused on acquiring trademarks, licenses, formulations, customer lists, and digital infrastructure. As a result, disputes in Section 363 sales increasingly center on IP rights, and license and distribution agreements. Fashion and beauty brands commonly operate through complex licensing and regional distribution models, raising legal questions about assignability and contract assignment and cure obligations. Accordingly, asset purchase agreements, diligence processes, and license negotiations must be carefully executed to delineate assumed liabilities and ensure that IP transfers are clearly authorized by the sale order and any necessary consent, to avoid post-closing surprises or litigation. Depending on the governing agreements and IP at issue, licensors may possess statutory or contractual rights to object to a sale, which must be identified and addressed early in the process.

Continued Use of Stalking Horse Structures

“Stalking horse” bid structures remain prevalent, even in cases where the stalking horse buyer is an existing stakeholder or affiliate. Establishing a baseline bid helps debtors demonstrate value maximization and provides procedural protection against later challenges, particularly from unsecured creditors. Bankruptcy courts continue to scrutinize stalking horse bidder protections, such as breakup fees, sale timelines, and reimbursements of the buyer’s expenses, but generally approve them where supported by marketing efforts and evidentiary records.

Complementary Bankruptcy Tools to Support Sale Execution

Debtors increasingly deploy Section 363 sales in combination with other bankruptcy tools to enhance transaction certainty. These include critical vendor orders to stabilize supply chains, store‑closing procedures to liquidate inventory and exit unprofitable locations or business units, and structured financing orders incorporating milestones tied to the sale process. Together, these measures improve the likelihood that a restructured business will exit bankruptcy on an accelerated and economically viable timeline.

Implications for Buyers and Brand Owners

For acquirers, recent fashion and beauty Section 363 sales reinforce both the opportunity and the risk inherent in distressed transactions. While the “free and clear” protections of Section 363 remain powerful, buyers must conduct diligence with an eye toward financial performance and profitability improvements, successor liability theories, foreign regulatory regimes, and ongoing brand stewardship obligations. In global beauty and fashion transactions, coordination with non‑U.S. proceedings and licensees is often essential.

For brand owners and sponsors, these cases serve as a reminder that early planning matters. Companies that engage insolvency and bankruptcy advisors and commence marketing efforts before liquidity fully erodes are better positioned to execute value‑maximizing sales. Conversely, delayed filings can compress timelines, limit bidder participation and decrease value, particularly in brand‑driven businesses where momentum is critical.

Looking Ahead

In an environment marked by volatility in consumer spending, persistent supply‑chain pressures, and a higher cost of capital environment, Section 363 sales are likely to remain a fixture in fashion and beauty restructurings. Whether used to bridge to new ownership or as part of an orderly wind‑down and liquidation, these transactions continue to shape how iconic brands are repositioned or reinvented or exit the market.