UPDATE: June 22, 2020: RTW Retailwinds is preparing a bankruptcy filing that would entail the closure of all of its stores, according to a Bloomberg report that cited anonymous sources.

A spokesperson for the company, which is the parent of women’s apparel retailer New York & Co., did not immediately reply to Retail Dive’s request for comment.

Dive Brief:

• After earlier indicating bankruptcy was "probable," RTW Retailwinds said in a securities filing it could close more than 150 stores, or close all of its stores, were it to file.
• The apparel retailer, owner of New York & Co., already planned to turn itself into a "digitally dominant retailer," with plans to close more than a third of its 387 stores over the next year and a half. But the COVID-19 crisis has brought financial turmoil with it.
• RTW said earlier this week it entered into a forbearance agreement with its bank, Wells Fargo, after RTW acknowledged previously that it had defaulted on its credit facility terms. The agreement with Wells Fargo calls for a reduction in available letters of credit, new repayment terms and reporting requirements, cash sweeps, and increased interest rates, among other changes to the loan.

Dive Insight:

When the women's apparel retailer changed its name from New York & Co., its intent was to "establish a strong and distinct corporate identity," centered in part on celebrity partnerships and exclusive brands as well as value pricing and store service. With sales flagging, RTW was also looking at paring its footprint and shifting to online.

Whatever its chances were of executing such a turnaround, the COVID-19 pandemic has derailed those efforts. The company's working capital was negative as of Feb. 1 (to the tune of minus $21.4 million), and finances have only skidded from there as the retailer closed its stores as part of the national effort to slow the spread of the pandemic. The company said in its 10-K, released Tuesday, that, with all cash sources taken into account, it doesn't have the cash flow to meet its working capital needs. Meanwhile, operating losses have led to a retained deficit of $164.6 million. 

RTW mentioned "COVID-19" more than 75 times in its 10-K, an indication of just how much damage the pandemic has done to its business. The disease could have an impact on everything from cash flow to its vendors to customer loyalty. Adding to the difficulty of nearly every aspect of business now is the fact that, in RTW's words, "It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic as the situation is rapidly evolving." And while the retailer has started reopening stores, it said it "cannot reasonably estimate the length or severity of COVID-19," making it difficult, if not impossible, to predict future performance and cash flow. 

RTW also said that it "may not be able to mitigate the impact COVID-19 has had and will have on its business and has been considering available options including restructuring its obligations or seeking protection under the bankruptcy laws in which case there will likely not be any value distributed to its shareholders and its shares could be cancelled for no consideration."

Along with all of its financial troubles, the retailer disclosed in April that its CEO-elect resigned unexpectedly along with four of its board directors.

The retailer had troubles that preceded the pandemic. In its 10-K, RTW reported that top-line sales fell 7.4% in fiscal 2019 to $827 million and net income went from $4.2 million in the previous year to a $61.6 million loss. Comparable store sales fell 5.4%.

RTW's current situation is a vivid example of the risks from COVID-19, especially to apparel retailers, department stores and others already struggling with declining sales, profits and customer traffic. Those players already had little wiggle room and now face a massive uphill challenge.