- Tailored Brands won court approval for its plan to reorganize in Chapter 11 bankruptcy after filing in August, the company said in a press release.
- A judge's sign-off puts the retailer in the final stages of the process. Tailored Brands said it expects to exit bankruptcy by the end of November.
- Under the plan, Tailored Brands would shed $686 million in debt and turn ownership over to lenders and other creditors, after decades of being a publicly traded company.
The COVID-19 pandemic brought multiple crises to Tailored Brands. Already struggling going into the year, the spring's store closures created a major financial strain while a massive shift to remote work hit the very heart of the Tailored Brands business, which includes suit sellers Men's Wearhouse and Jos. A. Bank.
Things were so bad this summer, the retailer said it might have to cease operations altogether if it couldn't raise more liquidity. After temporarily closing its stores, its first-quarter revenue plummeted by more than 60%. It moved to permanently close up to 500 stores and eliminate 20% of its corporate staff.
In announcing its imminent emergence from bankruptcy, CEO Dinesh Lathi struck an optimistic note, saying that the company has "implemented new buy online, pick up in store and contactless payment technology to better serve our customers during the pandemic," as well as opened a new next-generation store, curated products, forged new partnerships, and advanced new diversity and equity initiatives.
Coming out of bankruptcy, Tailored Brands' capital structure will consist of a $430 million asset-based loan facility, a $365 million exit term loan and $75 million of cash from a new debt facility to support the retailer's operations and strategic initiatives.
Chapter 11 has given Tailored Brands some much-needed breathing room for now. But uncertainties about demand abound. Even with news of a potentially effective vaccine, white-collar workers may not return to their offices en masse for many months yet. And it's difficult to say if fashion and apparel trends around business attire will ever return to their pre-pandemic norms.
"Men's Wearhouse and Jos. A. Bank, they are really formal-focused, and it is by and large suiting that drives their business," Neil Saunders, GlobalData Retail managing director, said in an October interview. "How do you change a business like that, especially when you've got a massive debt pile? I don't know."
Saunders added: "In my view, I just don't think that there is really a need for Men's Wearhouse going forward. The acid test is, if it didn't exist, would you invent it? Because you have to be absolutely crazy to invent it at this point in time."