Charming Charlie to close stores, cut corporate staff
- Charming Charlie plans to downsize its operations, saying in a press release that it would close an unspecified number of underperforming stores, as well as close an office in Los Angeles, and cut staff at its Houston headquarters and distribution center. The company is dubbing these moves a "back-to-basics" strategy.
- "By reducing the size and scale of our operations, we have the opportunity to stabilize the business," interim CEO Lana Krauter said in a release. "We also will be better equipped to read and react to trends and what our customers want, which had been the hallmark of our success."
- Krauter added that the women's accessories retailer was "working closely with our outside advisors to explore a range of alternatives to help ensure the company has adequate sources of financing and the right capital structure to support the business on an ongoing basis." Charming Charlie was reported this fall to be trying to win a loan to help it through the holiday season. Unnamed sources told The Wall Street Journal that "an in-court restructuring" — i.e., bankruptcy — "hasn't been ruled out" for the retailer.
Charming Charlie is quickly burning through cash, raising its risk of default.
Founded in 2004, the women's accessories and jewelry retailer made a name for itself by organizing its assortments by color, making for bright, uniquely organized stores. Backed by private equity firms TSG Consumer Partners and Hancock Park Associates, the company has struggled to pay off its debt after a period of rapid expansion. Fitch includes the retailer on its primary "loans of concern" list for its $150 million outstanding loan.
In October, S&P analysts led by Adam Melvin wrote that they expect "higher cash use and [loan] covenant compliance tightening, which could lead to a covenant breach in 2018" for Charming Charlie, according to a report emailed to Retail Dive. Those events could, in turn, lead to a debt restructuring next year, the analysts added.
Debtwire wrote in the fall that the retailer "has struggled in recent years with exposure to the highly fragmented market of fashion jewelry and accessories" but that "[t]his didn't stop Charming Charlie from expanding by 79 stores between 2013 and 2015."
S&P's Melvin wrote that his team expects that the retailer's "weak operating trends will persist" over the next 12 months, which would force the company to rely on credit for liquidity. More broadly, Melvin and his team pointed out that Charming Charlie operates in a highly competitive sector and lacks the size and scope of its larger rivals.
- press release Charming Charlie Launches Back-to-Basics Strategy
Follow Ben Unglesbee on Twitter