Dive Brief:
- Women's apparel seller Christopher & Banks has brought on strategic advisers, including B. Riley Securities, to evaluate "available strategic alternatives" as its sales and liquidity remain under strain.
- In its latest quarterly report, the company, which runs about 450 stores, issued a "going concern" warning that it might not survive over the next 12 months.
- Christopher & Banks also indicated that bankruptcy is among the options it is considering, along with an out-of-court debt restructuring and a sale of the company.
Dive Insight:
Mall-based apparel retailers have been among the hardest hit financially by the COVID-19 crisis. The pandemic brought a double blow to the sector. Safety concerns have kept shoppers away from indoor malls at the same time as consumers, many of them working from home and avoiding social gatherings, have pulled back spending on clothes.
Christopher & Banks' disclosure that it might not survive the crisis followed a third quarter that brought a sales decline of 22.6% year over year and saw a total loss of $10.8 million.
That represented an improvement over the company's second quarter, which brought a deeper sales decline and net loss. But Q3 fell short of the company's own expectations, according to CEO Keri Jones, who joined the company in 2018 after previously serving as an executive at Dick's Sporting Goods.
"We have not seen the level of sales recovery that we had anticipated," Jones said in a press release. She added that "based on our own retail traffic trends we believe she remains hesitant to shop in stores."
On a conference call, Jones elaborated on COVID-19's impact on the company's shoppers. "The Christopher & Banks customer is a practical, middle-aged Midwestern woman who largely buys apparel for specific events, whether it be going to the movies, out to dinner, holiday parties or other social gatherings," she said, according to a Seeking Alpha transcript. "In the absence of these types of social engagements during COVID, her demand for outfitting is simply lower."
Under Jones, Christopher & Banks has tried to improve its assortment, marketing, customer service and omnichannel experience. Jones noted that the company was driving positive comparable sales and higher margins until the pandemic hit.
"If given adequate financial runway, we continue to believe in our long term potential based on the strategic foundation we have established, our loyal customer following and the traction we have gained in attracting new customers to our brand," she said in the release.
For a relatively small retailer in a struggling sector, there was already little error for margin. COVID-19 for Christopher & Banks, and other companies in similar positions, has had an outsized impact on finances. In the industry, the year is tracking toward a record number of bankruptcies, with many more likely to come in 2021.
As Christopher & Banks tries to raise the liquidity to stay afloat, it is also considering other, smaller moves such as seeking rent concessions from landlords and cuts to operating and capital spending. The company cautioned that it could not assure success in its efforts to refinance and raise capital and liquidity. In the release, it indicated it would not disclose further updates until the board approves a transaction or deems a disclosure appropriate.
As Christopher & Banks heads for a possible bankruptcy, Jones and other top executives received hundreds of thousands of dollars in retention bonuses approved by the board. In an SEC filing, the company said the bonuses were meant to "facilitate business continuity during a critical phase in which the Company is evaluating its strategic options."
