Express Inc. is restructuring its debt and may file for bankruptcy, the Wall Street Journal reported. The move is an attempt to avoid filing for Chapter 11 bankruptcy.
The apparel retailer hired M3 as a restructuring advisor and law firm Kirkland Ellis, the WSJ reported. Its share price fell 40% by end of business on Tuesday.
Express is No. 114 in the Top 1000, Digital Commerce 360’s ranking of North America’s leading retailers by online sales.
Express reports growing debt
The retailer reported $274.7 million in debt in the third fiscal quarter of 2023. That was an increase from $235.4 million in the year-ago period. $65 million of the debt is from a loan the retailer took out in 2023 at 15% interest as a “short-term measure to strengthen our liquidity position,” former chief financial officer Jason Judd said in a Q2 earnings call.
The retailer is in talks with its creditors, which include Wells Fargo, Bank of America, Hilco Global and Gordon Brothers Group, Bloomberg reported.
If lenders agree to give Express more liquidity or repayment options, the retailer may avoid bankruptcy. Express is also beholden to its vendors, who could stop shipping products without a strict payment schedule, according to the WSJ report.
Express financial results
The apparel retailer, which includes the UpWest and Bonobos brands, reported net sales grew 5% to $454 million in the most recent fiscal quarter ended Oct. 28. However, it also recorded an operating loss of $28.7 million and a net loss of $36.8 million.
Express introduced an expense reduction initiative in 2022, with a goal of saving $200 million by 2025.
“The company is continuing to conduct a comprehensive review of its business model to identify actions that are expected to meaningfully reduce pre-tax costs and enable a more efficient and effective organization and has engaged external advisors to assist in this effort,” it said in a third-quarter press release.
Express saved $30 million during that third quarter and was on track to achieve $80 million in cost savings for 2023.
The retailer undertook extensive discounting to sell apparel in the quarter, it said. That had a negative impact on margins.
“Beginning last year, we faced a number of challenges, including declines in our customer file, conversion and store traffic, driven by missteps in our merchandise strategy, most notably in women’s, where we were out of balance across categories, price points and wearing occasions,” CEO Steward Glendinning told investors. “This misalignment between our assortment architectures and customer demand significantly impacted our historic sales and margins.”
Express executive changes
Former CEO Tim Baxter announced his resignation in September, one day after the retailer announced Q2 results. Express announced Stewart Glendinning would replace him. Glendinning previously worked as group president of prepared foods and chief financial officer at Tyson Foods.
Chief financial officer Jason Judd left Express in November, one year after joining the company. The retailer has not yet named a new CFO, and senior vice president Mark Still is interim CFO.
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