Long time mall retailer pass WHP Global filed for Chapter 11 bankruptcy protection on Monday, but a group of investors led by brand management firm WHP Global is looking to rescue the company through an acquisition.
Express, whose portfolio includes its namesake logo, Bonobos and UpWest, said it would close 95 of its eponymous stores and all UpWest doors. Closing sales are expected to begin on Tuesday. The company said the operating hours of the remaining stores will not change and it will continue to accept orders and returns as usual.
Express said in a press release that it has filed for bankruptcy to “facilitate” the sale of most of its retail stores and operations to the investor group, which includes WHP, Simon Real Estate Group and Brookfield properties. It has 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 and better position the company to achieve profitable growth and maximize value for the company’s stakeholders,” Express said.
Express also received $49 million in cash from the IRS in connection with the CARES Act — a critical influx of cash the company had been waiting for to shore up its balance sheet.
“We continue to make significant progress in improving our product assortment, increasing demand, connecting with customers and enhancing our operations,” CEO Stuart Glendinning said in a statement.
“We are taking an important step that will strengthen our financial position and enable Express to continue developing our business initiatives,” he added.
The casual wear brand, founded in 1980 by Les Wexner's Limited Brands, has seen sales decline over the past few years as debt and expensive mall rents slow its business.
Earlier this month, CNBC reported that Express was struggling to pay its vendors on time, suggesting it was cash-strapped and struggling to manage cash flow. When retailers cannot pay their vendors, suppliers sometimes tighten payment terms or refuse to fulfill orders, which can increase pressure on a company's liquidity.
Last spring, Express acquired the operating assets and related liabilities of Bonobos for $25 million from… Walmart In a joint deal with WHP. The deal came at a time when Express' core business was weak and cash was tight, Neil Saunders, GlobalData's managing director, said in a note on Monday.
The biggest problem it faces is declining revenues, which are down about 10% since 2019, Saunders said.
“This is in marked contrast to the apparel sector which grew strongly over the same period. This has put the company under significant financial pressure and led to some significant losses. None of this is sustainable and is one of the reasons for bankruptcy,” Saunders said.
“The problems that Express has are not all of its own making,” he said. “The formal and casual market for both men and women has declined over recent years due to the rise of working from home and the formalization of fashion. This puts Express firmly on the wrong side of the trends and, in our view, the chain has made little effort to adapt.”
Bankruptcy will provide some essential relief to Express and help it return to a stronger position as it works to implement its turnaround strategy. It would allow the retailer to get out of expensive and burdensome leases, many of which exist in distressed malls, and make the company more attractive to buyers.
The powerful law firm Kirkland & Ellis, which led Bed Bath & Beyond and several other failed retailers through bankruptcy, is serving as legal counsel to Express. Moelis & Co. was appointed. as its investment bank and signed M3 Partners as its financial advisor.
