Dive Brief:

• On Thursday, Christopher & Banks disclosed a cascade of defaults from earlier this month on financial obligations, including key loans and the lease on its headquarters, according to a securities filing.
• Specifically, the distressed apparel seller said it has received notices of default on a term loan, secured vendor program, credit facility and the lease on its corporate headquarters. The company said it is working with advisers to evaluate the default notices and negotiating with lenders to resolve its outstanding obligations. 
• Those defaults were triggered directly or indirectly by the company's failure to pay $193,000 due on its vendor program, $142,000 due on its headquarters lease and to "timely pay interest" due Jan. 4 on its term loan.

Dive Insight:

Christopher & Banks' disclosure amounts to a flaming red distress signal. For a company with public shareholders, the failure to make ordinary payments on financial obligations is an admission of deep financial ailments. It has few if any options beyond bankruptcy court, a sale, a sudden capital influx or success in private negotiations with its creditors. 

Less than a month ago the women's apparel company, which operates some 450 stores, issued a "going concern" warning that it might not survive the next 12 months. It also disclosed that it was working with advisers to evaluate "available strategic alternatives." Among the options on the table is bankruptcy, according to the company's most recent quarterly report.

The defaults from January compound Christopher & Banks' financial woes. Its term loan lender, ALCC, declared that it could terminate its commitments under the loan and has the right to demand Christopher & Banks immediately pay the full balance outstanding, which amounts to $5 million in principal and interest. The apparel company's credit facility lenders issued similar statements. Either could trigger a major additional liquidity crisis.

Meanwhile, Christopher & Banks is facing possible eviction from its corporate headquarters because of the unpaid rent.

The retailer's financial travails follow a brutal year for mall-based apparel, as the COVID-19 crisis forced store closures and, even after stores reopened, depressed foot traffic to shopping centers. At the same time, consumers have purchased less apparel as they shifted to remote work and avoided social outings out of health concerns. 

For the third quarter, Christopher & Banks' sales fell 22.6% year over year while its losses totaled $10.8 million, which represented an improvement over the company's second quarter but still fell short of management expectations.

"The Christopher & Banks customer is a practical, middle-aged Midwestern woman who largely buys apparel for specific events, whether it be going to the movies, out to dinner, holiday parties or other social gatherings,"  CEO Keri Jones told analysts in December, according to a Seeking Alpha transcript. "In the absence of these types of social engagements during COVID, her demand for outfitting is simply lower."

Jones, a former Dick's Sporting Goods executive who joined Christopher & Banks in 2018, has worked to improve the apparel company's assortment, marketing, customer service and omnichannel experience. She said in December that the company was driving positive comparable sales and higher margins until the pandemic hit.