Chico's shores up finances, digital operations amid store closures

Dive Brief:

Chico's FAS on Monday said in a press release that its amended and extended $300 million senior secured credit facility has closed, consisting of a $285 million asset-based revolving credit agreement and a $15 million "first-in last-out" term loan, maturing in 2025.
The company, which runs the Chico's, White House Black Market and Soma brands, last week also announced a "digital transformation" to boost personalization and marketing, and introduced a buy now, pay later option through Afterpay, according to another press release.
Both announcements come amid intensified scrutiny of store profitability. Executives in August said they enlisted A&G Real Estate Partners to restructure its lease portfolio. The company has permanently closed 28 stores this year and anticipates closing another 25 to 50, according to a call transcript from The Motley Fool.

Dive Insight:

In August, CEO Molly Langenstein told analysts that the company's loyal customer was "anxious to get in stores and to get back to speaking with her trusted associate, and we see that across the board" after the pandemic forced stores to temporarily close earlier in the year.

Nevertheless, Chico's is working to make it easier for customers to shop online. The digital transformation announced last week includes partnerships with Salesforce and Contentstack to develop "a single platform with a unified view of its customers" and to more effectively leverage data for messaging across channels.

Chico's has also taken a page from Stitch Fix, in the second quarter launching a free online personal styling service that Langenstein said has garnered conversion rates six times the site's average.

The company was already scrutinizing the profitability of its stores, as executives told analysts weeks ago. That effort entails renegotiating as well as exiting leases, they said.

The company's store productivity at reopened locations lags behind other specialty retailers, MKM Partners Managing Director Roxanne Meyer warned after its second quarter report, noting the company "remains in 'show me' mode as it relates to demonstrating stability let alone a path for profit improvement."

The recent upsurge in COVID cases in most states makes a digital transformation especially prudent. Several retailers have been bracing for a new wave of the pandemic to disrupt the all-important fourth quarter. Even as she described customers eager to return to stores, Langenstein herself warned in August that data showed that "as cases have escalated in spike in hot spots, the traffic does recede."