Liberated Brands' bankruptcy shows the red flags companies cannot ignore
Liberated Brands, the operator behind Quiksilver, Billabong, and Volcom, filed for Chapter 11 bankruptcy in February 2025, leading to the closure of all 124 U.S. retail stores and the layoff of approximately 1,400 employees. The move follows years of financial pressure exacerbated by the rise of fast fashion, declining discretionary spending, and shifting consumer behavior.
While retail has seen no shortage of high-profile bankruptcies in recent years—including J.Crew, Bed Bath & Beyond, and Party City—the collapse of Liberated Brands reflects broader corporate challenges that extend beyond apparel and retail.
The structural issues behind the company’s downfall are not unique. Companies across industries face similar pressures, from liquidity mismanagement to declining market share, and often exhibit the same warning signs long before a crisis. Financial data and case studies suggest several indicators that companies in any sector should monitor.
A prolonged decline in revenue is one of the earliest indicators of financial distress. Liberated Brands saw stagnating sales as consumer preferences shifted toward fast fashion brands like Shein and Zara, which operate on shorter design cycles and direct-to-consumer models. Between 2019 and 2024, fast fashion retailers grew their market share by 21%, while legacy brands reliant on wholesale partnerships struggled to maintain pricing power.
Industries such as media, automotive, and consumer electronics have seen similar pressures. Traditional television networks, for example, have faced revenue declines due to cord-cutting, with U.S. pay-TV subscriptions dropping from 73% of households in 2015 to 43% in 2024.
Companies that carry high levels of debt often find it difficult to adapt to market shifts. Liberated Brands operated under financial constraints typical of private equity-backed firms, with significant leverage restricting investment in digital transformation and marketing. Retail bankruptcies involving leveraged buyouts have increased in frequency, with companies such as Toys “R” Us and Neiman Marcus citing debt burdens as key contributors to their financial distress.
The issue is not exclusive to retail. The airline industry has struggled with high debt loads in a high-interest rate environment. Delta Airlines saw its long-term debt rise from $9 billion in 2019 to over $27 billion in 2023, increasing its financing costs and limiting operational flexibility. Similarly, in the tech sector, WeWork’s 2023 bankruptcy was largely attributed to unsustainable debt obligations, despite strong revenue growth in prior years.
A pattern of store closures or underperforming business units without a clear turnaround strategy often signals broader structural issues. Liberated Brands announced multiple rounds of store closures before filing for bankruptcy, mirroring other struggling retailers such as Foot Locker, which plans to shutter 400 locations by 2026 due to declining mall traffic.
The same pattern has played out in industries reliant on physical infrastructure. In financial services, HSBC has closed 27% of its global branches since 2019 due to shifting customer behavior. Automotive manufacturers have also faced challenges with underperforming product lines, with General Motors discontinuing its entry-level Chevrolet Spark and shifting production to higher-margin EV models. Companies that fail to proactively restructure and repurpose assets often face steeper financial losses.
Consumer and technology shifts can outpace companies that fail to invest in modernization. Liberated Brands struggled to compete with digital-first brands, reflecting a broader issue across multiple sectors where incumbents have lost market share to more agile competitors.
In the financial sector, legacy banks have seen fintech challengers erode their market share. Digital-only banks such as Chime and Revolut have grown at annualized rates exceeding 30%, while traditional banks with high branch overheads have struggled to compete on cost and user experience. In entertainment, Disney’s legacy cable networks have faced declining revenues as streaming platforms like Netflix and Amazon Prime capture an increasing share of content consumption, with traditional linear TV advertising revenues down 12.5% year-over-year in 2024.
Rapid expansion without sustainable consumer demand is another common factor in corporate failures. Liberated Brands aggressively expanded its retail footprint in the 2010s, but failed to generate the foot traffic needed to sustain its stores. Similarly, Bed Bath & Beyond’s attempt to expand private-label offerings in 2020 resulted in excess inventory and liquidity issues, contributing to its bankruptcy in 2023.
Overexpansion is a challenge in industries beyond retail. The U.S. shale industry saw a wave of bankruptcies following aggressive expansion in the early 2010s, with over 190 North American oil and gas producers filing for bankruptcy between 2015 and 2021 due to unsustainable debt and declining oil prices. In the restaurant industry, chains such as Sweetgreen and Shake Shack have faced investor scrutiny over expansion strategies that resulted in lower per-store profitability despite overall revenue growth.
Brand perception and consumer loyalty remain critical, especially for companies with high-margin products. Liberated Brands’ core appeal was rooted in surf and skate culture, but a failure to innovate and differentiate from competitors eroded its market relevance. Legacy retailers like Gap have faced similar struggles, with brand equity declines contributing to a 28% drop in revenue between 2019 and 2024.
The pharmaceutical industry has experienced similar challenges. Mylan, once a dominant player in the generic drug market, saw its brand reputation decline following controversy over EpiPen price hikes, leading to declining revenues and a merger with Upjohn in 2020. Similarly, Peloton saw a rapid decline in brand equity post-pandemic, with its stock price dropping from a peak of $160 in 2021 to under $10 by 2024, reflecting the challenge of sustaining a premium brand in a price-sensitive market.
A reliance on discounts and promotions to drive sales often signals underlying demand weaknesses. Liberated Brands, like many struggling retailers, relied on deep discounting to move excess inventory, which ultimately eroded margins. Apparel brands such as Under Armour have faced similar challenges, with markdown-driven sales growth failing to translate into long-term profitability.
Similar patterns exist in industries such as automotive and consumer electronics. Electric vehicle makers, including Tesla and Rivian, have introduced aggressive price cuts to maintain demand, leading to concerns about profitability and long-term brand positioning. The smartphone industry has seen similar issues, with premium brands like Samsung and Apple offering increased trade-in incentives to counteract slower upgrade cycles.
Liberated Brands’ bankruptcy is another example of how multiple stress factors—overexpansion, financial mismanagement, and shifting consumer behavior—can combine to push even well-known brands toward insolvency.
The warning signs were present long before the bankruptcy filing, reinforcing the importance of long-term strategic planning, disciplined financial management, and adaptability in a changing marketplace. Companies that fail to respond to these structural risks often find that a turnaround is no longer an option when the crisis finally arrives.