Dive Brief:

• Charming Charlie has brought in a financial adviser, Clear Thinking Group, to assist with balance sheet and liquidity issues, according to a Debtwire report, which was based on anonymous sources. A spokesperson for the retailer did not immediately reply to a request for comment, nor did Clear Thinking Group.
• In April, the apparel and accessories retailer refinanced a $35 million loan, tied to its trip through Chapter 11 last year, though it still faces a "liquidity crisis" and "heavy competition overwhelming the retail sector as a whole," according to Debtwire.
• Tanvi Acharya, a reporter with Debtwire, said in an interview with Retail Dive that the retailer has been trying to raise new capital, potentially through new equity or debt. 

Dive Insight:

About 15-years-old, Charming Charlie made a name for itself with a color scheme approach to merchandising its accessory and jewelry assortments while pricing products between more upscale retailers like Macy's and specialty sellers like Claire's that cater to younger shoppers.

It grew into a retailer with more than $400 million in sales, but may have failed to adapt to larger shifts in the retail landscape. In the years before it filed for Chapter 11, revenues fell 22% and its profits fell by more than 75%, CFO Robert Adamek said at the time of the filing. He said then that consumer shifts away from physical retail had been "further exacerbated by merchandising miscalculations, lack of inventory [and] an overly broad vendor base, all of which has led to underperformance and reduced sales."

Charming Charlie exited from Chapter 11 last spring after filing in December 2017. It shed about 100 stores in bankruptcy and was taken over by lenders including THL Credit, which became its majority shareholder.

On exiting, Charming Charlie CEO Lana Krauter said the retailer emerged from Chapter 11 "as a stronger, more focused organization." THL CEO Christopher Flynn said then that his firm was confident in Charming Charlie's "underlying fundamentals" and "growth opportunities we see for the business going forward."

Today, Charming Charlie has about 260 stores, down from more than 370 when the retailer filed for Chapter 11 in late 2017. Acharya noted that THL has valued its investment in Charming Charlie higher since the fourth quarter, indicating better performance at the retailer.

"They are improving slightly, but given that it's retail, it still has its troubles," she said. New capital and liquidity, Acharya added, could prevent a second Chapter 11 filing. At the moment, though, she said it is too early to know if a Chapter 22 is in the cards for Charming Charlie.

In a May conference call, Flynn said that refinancing Charming Charlie's asset-backed loan left it in a better liquidity position headed into spring but that the retailer "continues to face headwinds in the retail space," according to a Seeking Alpha transcript.

He added later in the call that the retailer's management has "done everything that they can to position this business for growth and a turnaround."

The year has already seen two major Chapter 22 filings with Gymboree and Payless, which had both entered and exited bankruptcy in 2017. Both liquidated in their second trip through bankruptcy court, a reminder that even a well-planned bankruptcy that removes debt and unprofitable stores from a retailer's books may not be enough to save a retailer from steep drops in traffic and sales.