Dive Brief:
- In a sign of how much the pandemic has complicated its turnaround, Francesca's said it plans to close 140 stores by Jan. 30 in a filing with the Securities and Exchange Commission on Monday. The retailer runs about 700 locations, mostly in malls.
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The apparel retailer also said that if it's "unable to raise sufficient additional capital to continue to fund operations and pay its obligations," it will likely seek a restructuring under bankruptcy protection.
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The company noted that it previously disclosed that it's "evaluating various alternatives to improve its liquidity and financial position," including lease, cost cuts, debt refinancing and restructuring its debt and liabilities in or out of bankruptcy.
Dive Insight:
Francesca's has been making noises about a possible bankruptcy filing for months, as the pandemic took its toll on an already challenged apparel market.
The retailer last year was already closing stores and switching up its board and executive leadership as part of a turnaround, and there seemed to be light at the end of the tunnel by year's end. But the pandemic has complicated its plans by forcing stores closed and creating dire financial and inventory challenges.
The company earlier this year added a "going concern" warning to its public filings after an auditor found reasons for "substantial doubt" about Francesca's ability to remain solvent over the next 12 months. The going concern language violated its asset-based loan agreement, but the retailer was able to get a waiver from its lenders.
Francesca's runs about 700 stores mostly in malls. Enclosed malls themselves are in dire straits as people continue to shy away from shopping indoors during the pandemic, and as anchors continue to abandon them.
