Dive Brief:

• Stage Stores filed for Chapter 11 bankruptcy with plans to liquidate its operations unless it can find a buyer soon.
• The company's chief restructuring officer said in court papers that liquidity shortfalls before the pandemic created challenges, and COVID-19 was the "proverbial 'nail in the coffin'," exacerbating its problems.
• The company plans to open 557 of its stores on May 15 and another 67 in a second phase at the end of the month, according to a press release. In court papers, the company is asking for bids by June 1 from any potential buyer that would want to keep operating the retailer.

Dive Insight:

Stage Stores faced a difficult road to financial health before the crisis hit. Last year, the company — which traces its history back to the 1920s, when the Palais Royal and Bealls brands were founded —​ announced a rapid, ambitious transformation of itself into an off-price retailer. Its plan called for the conversion of all of its Bealls, Palais Royal, Peebles, Stage, and Goody's department stores to its off-price Gordmans banner by the end of 2020. 

That plan was based on promising sales results from those department stores it had already spun into off-price. But some analysts were skeptical even before the company disclosed disappointing fourth quarter results given the difficulties involved in executing a business transformation on such a short timeline and the relatively limited data from those initial conversions. Plus, Stage Stores was doing all this with relatively little capital, as its finances were already stressed after years of falling customer traffic and a declining department store business. 

Q4 brought lackluster sales growth that fell short of the company's projections, throwing the retailer into turmoil. As Retail Dive reported previously, Stage Stores began quietly laying off employees and closing stores in February as it worked through a liquidity crisis and negotiations with potential lenders and investors. 

That was already the backdrop, when a global pandemic shuttered much of physical retail and cast even more gloom on those retailers already in distress. In April, the company also disclosed it had entered a forbearance agreement with Wells Fargo which, among other things, significantly reduced its available borrowings. At the same time, it asked for concessions from its suppliers to help it avoid Chapter 11.

Elaine Crowley, Stage Stores' chief restructuring officer, who has chaired the audit committee for Stage Stores' board for the past three years, said that the company had been looking at possible profitable footprints for Stage Stores. That would have required a reduction of stores from what it had announced just months ago. But the pandemic upended those plans, in part by making it impossible to close stores, because it could not open them to run going out-of-business sales. 

With the company's stores shut because of the pandemic, it has not paid rent on most of its 734 leases since March, with some $31 million in overdue rent, according to Crowley. Stage Store's problems were made worse when landlords started locking it out of some locations with threats to evict the retailer and get rid of the inventory. 

All of these challenges have proven insurmountable to Stage Stores on its own. Unless a buyer steps up to take it over and finish its plans to convert it to an off-price retailer, the company plans to wind down.