Dive Brief:
- Apparel retailer Express Inc. is preparing for a possible debt restructuring that could include a bankruptcy filing “within weeks,” The Wall Street Journal reported Monday, citing sources familiar with the matter.
- According to the report, Express has hired M3 Partners and law firm Kirkland & Ellis. Both entities specialize in debt restructuring. The retailer is looking to avoid a Chapter 11 filing by restructuring its debt outside the bankruptcy process, the report said. Express reported total debt of about $275 million at the end of the third quarter, an increase from $235.4 million a year before.
- Express, M3 and Kirkland & Ellis did not immediately respond to requests to comment from Retail Dive.
Dive Insight:
During the company’s last earnings call in November, recently appointed CEO Stewart Glendinning acknowledged the company made some missteps: Among other factors, there was a misalignment between its assortment and customer demand.
Express took a hit during the pandemic as its core offering — business casual — fell out of favor as work-from-home surged.
“Unfortunately, my previous assessment of Express’ fragile financial situation leading to a possible bankruptcy due to declining revenue, gross margin profits and ballooning debt of $280 million is a foregone conclusion,” Shawn Grain Carter, a retail industry consultant and professor at the Fashion Institute of Technology at the State University, said in an email to Retail Dive. “With high-interest rates, the retail company must decide between the ‘lesser of two evils.' Moreover, until they fix the waning consumer demand for their merchandise and elevate the brand and product mix, financial wizardry will not resolve their retail woes.”
Over the past several years, the company has undergone a number of changes as it works to improve its performance. Last January, WHP Global closed on a strategic partnership with Express. The two entities formed an intellectual property joint venture under which WHP contributed $235 million for a 60% stake, while Express retained the remaining 40%. The two entities in November announced plans to expand Express internationally, including in Indonesia and Paraguay, and grow its presence in Central America and Mexico.
And after the New York Stock Exchange warned of a potential delisting in late March, Express executed a 1-for-20 reverse stock split, which decreased outstanding shares to 3.7 million from 74.9 million. That stock split enabled Express to regain listing compliance with the New York Stock Exchange. Around the same time, Express said it planned to cut 150 jobs by the end of the third quarter.
The company also expanded its portfolio last year through a deal with WHP to acquire Bonobos from Walmart for $75 million. That acquisition helped guide the retailer to a 5% year-over-year uptick in Q3 net sales to $454.1 million from $434.1 million a year earlier. However, comparable sales for Express stores and e-commerce fell 4% and net loss grew to $36.8 million from $34.4 million in the year-ago period. Inventory was also up 14% for the quarter, rising to nearly $481 million from $422.7 million a year earlier.
“Express has the right building blocks in place with a strong portfolio of brands, a high-potential partnership with WHP and a premier omnichannel platform,” Glendinning said in the earnings announcement. “Our efforts to unlock our full potential and improve our performance are already underway.”
The apparel retailer in late November lowered its full-year 2023 guidance, now expecting net sales to be between $1.84 billion and $1.87 billion, with Bonobos driving $150 million in net sales.
