Mall retailer Express filed for Chapter 11 bankruptcy in Delaware federal court on Monday, but a group of investors led by brand management firm WHP Global is trying to save the company by buying it out.
Express, whose portfolio includes its namesake banner, Bonobos and UpWest, said it would close 95 of its namesake stores and all UpWest doors. Last January, the company had a total of 553 stores, according to company securities filings. It’s unclear how many of those were UpWest stores, but the brand’s website shows it has 10 locations.
Closeout sales are expected to begin on Tuesday. The company said the hours for the remaining stores will not change and will continue to accept orders and returns as usual.
In a press release, Express said it filed for bankruptcy to “facilitate” the process of selling most of its retail stores and operations to the investor group, which includes WHP. Simon Property Group and Brookfield Properties. It received a non-binding letter of intent from investors to purchase the assets and has also secured $35 million in new financing from some of its existing lenders, subject to court approval.
“The proposed transaction will provide Express with additional financial resources, better position the business for profitable growth and maximize value for the Company’s shareholders,” Express said.
Express also secured $49 million in cash from the IRS related to the CARES Act — a critical infusion of liquidity the company had been waiting to shore up its balance sheet.
“We continue to make substantial progress improving our product lines, increasing demand, connecting customers and strengthening our operations,” said CEO Stewart Glendinning.
“We are taking an important step that will strengthen our financial position and allow Express to continue to advance our business initiatives,” he added.
The business casual brand, founded in 1980 by Les Wexner’s Limited Brands, has seen its sales plummet in recent years as debt and expensive shopping center leases dragged down its business.
In a court filing, Express said it had $1.3 billion in total assets and $1.2 billion in total liabilities as of March 2.
Earlier this month, CNBC reported that Express was struggling to pay its suppliers on time, indicating that it was struggling financially and struggling to manage cash flow. When retailers can’t pay their vendors, suppliers sometimes tighten payment terms or refuse to fulfill orders, which can further strain a company’s liquidity.
Last spring, Express acquired the operating assets and related liabilities of Bonobos for $25 million from Walmart in common agreement with WHP. The deal came as “Express’s core business was weak and cash was tight,” GlobalData Chief Executive Neil Saunders said in a note on Monday.
But its biggest problem has been declining revenue, which is down about 10 percent since 2019, Sanders said.
“This is in stark contrast to a clothing sector that has grown strongly over the same period. This has put the company under great financial pressure and led to some significant losses. None of this is sustainable and is one of the reasons for bankruptcy” , Sanders said.
“The woes at Express are not all her own,” he said. “The formal and smart casual market for both men and women has softened in recent years due to the rise of working from home and the occasional shift in fashion. This puts Express firmly on the wrong side of trends and, in our view , the chain that was made with very little effort to adjust.”
The bankruptcy will provide some basic relief to Express and help it get back on a stronger footing as it works to implement its turnaround strategy. It will allow the retailer to escape costly and burdensome leases, many of which are in troubled malls, and has made the company more attractive to shoppers.
Powerhouse law firm Kirkland & Ellis, which has guided Bed Bath & Beyond and many other failed retailers through their bankruptcies, is serving as legal counsel to Express. Moelis & Co. has been tapped as its investment banker and M3 Partners has signed on as its financial advisor.