Express Files for Bankruptcy, Plans Closure of Nearly 100 Stores Amid Rescue Bid
Long-standing mall retailer Express has initiated Chapter 11 bankruptcy proceedings in Delaware federal court on Monday, signaling a pivotal moment for the brand's future. Despite the downturn, hope emerges as an investor consortium, spearheaded by brand management firm WHP Global, aims to salvage the company through acquisition. Express, recognized for its presence in malls nationwide, disclosed plans to shutter 95 of its Express stores alongside all UpWest outlets. The company, encompassing its flagship banner, Bonobos, and UpWest, boasted a total of 553 stores as of last January, per company filings. Although specific numbers for UpWest stores remain undisclosed, the brand's website indicates 10 existing locations.
Commencing Tuesday, liquidation sales are slated to commence. Express has assured customers that operational hours for the retained stores will remain unchanged, with continued acceptance of orders and returns. In a press release, Express cited the bankruptcy filing as a strategic move to expedite the sale of most retail operations to the investor conglomerate. The consortium, comprising WHP Global, Simon Property Group, and Brookfield Properties, conveyed their intent to purchase the company's assets through a non-binding letter of intent. Additionally, Express has secured $35 million in fresh financing from incumbent lenders, pending court approval, to facilitate the transition process.
Express stated that the proposed transaction will furnish the company with supplementary financial resources, strategically positioning it for profitable expansion and optimizing returns for stakeholders. Additionally, Express secured $49 million in cash from the IRS under the CARES Act. CEO Stewart Glendinning remarked, "We are steadily advancing in refining our product offerings, stimulating demand, engaging customers, and fortifying our operational framework."
Glendinning added, "This marks a pivotal stride in bolstering our financial foundation and empowering Express to propel our business endeavors forward."
The business-casual apparel brand, originating from Les Wexner's Limited Brands in 1980, has witnessed a decline in sales in recent years, attributed to mounting debt burdens and the financial strains of mall leases. According to court filings, as of March 2, Express reported $1.3 billion in total assets and $1.2 billion in total debts. Earlier this month, CNBC reported on Express' struggles to meet vendor payment obligations, indicating underlying financial distress and challenges in managing cash flow. Delays in vendor payments often signify strained liquidity and financial difficulty for retailers, potentially leading to tightened payment terms or refusal to fulfill orders, exacerbating liquidity pressures.
Last spring, Express embarked on an acquisition of Bonobos' operational assets and associated liabilities from Walmart in a collaborative agreement with WHP, valued at $25 million. This move transpired amidst Express's weakened core business and constrained cash reserves, as noted by Neil Saunders, Managing Director of GlobalData, in a statement issued on Monday. However, the paramount issue remained the downward trajectory of revenue, with a decline of approximately 10% since 2019, according to Saunders.
Saunders highlighted the stark contrast between Express' performance and the robust growth observed in the apparel sector during the same period, attributing this disparity to significant financial strain and resultant losses, ultimately leading to the bankruptcy declaration. "The challenges faced by Express are not solely of their creation," Saunders clarified. "The market for formal and smart casual attire, catering to both men and women, has experienced a downturn in recent years due to the increasing prevalence of remote work and the casualization of fashion. Express finds itself at odds with prevailing trends, and in our assessment, the company failed to sufficiently adapt."
Bankruptcy proceedings are anticipated to provide crucial relief for Express, facilitating a return to a more robust financial position as it endeavors to execute its revitalization strategy. By shedding costly and onerous leases, particularly in struggling mall locations, the retailer stands to enhance its appeal to potential buyers. Renowned legal powerhouse Kirkland & Ellis noted for guiding Bed Bath & Beyond and numerous other retailers through bankruptcy proceedings, has been enlisted as Express's legal counsel. Moelis & Co. has been selected as the investment banker for the company, while M3 Partners has been appointed as its financial advisor.
