Apparel retailer Express (NYSE:EXPR) — which focuses on business casual attire — is on the ropes amid insider whispers of a debt restructuring initiative. People with knowledge of the matter note that one of the courses of action could involve filing for bankruptcy. If so, the filing could happen within weeks, sending EXPR stock plummeting.
According to The Wall Street Journal, the insiders stated that the Ohio-based retailer hired restructuring advisor M3 and law firm Kirkland & Ellis. At the core of the matter is addressing the nearly $280 million of debt amid declining sales.
Nevertheless, Express is still attempting to avoid filing for bankruptcy by restructuring debt outside of Chapter 11. However, the outcome of such a proposal hinges on the retailer’s lenders. Essentially, they must agree to provide more liquidity or loosen repayment options.
In addition, EXPR stock avoiding the bankruptcy label involves the underlying enterprise convincing vendors to keep shipping goods without tightening payment schedules. However, that will be a tall order. Generally speaking, vendors are leery about shipping products to financially troubled enterprises for fear of not being paid in full.
Per the WSJ, M3 declined to comment. Additionally, Express and Kirkland & Ellis didn’t immediately respond to requests seeking comment. Since the start of the year, EXPR stock has fallen over 75%. In the past 52 weeks, it’s down more than 90%.
EXPR Stock Falls on Economic Woes and a ‘Legacy’ Headwind
As the WSJ reported, Express struggled to spark momentum in its business because of broader economic woes. A combination of higher interest rates, slower store traffic and lower consumer spending contributed to overwhelming odds against EXPR stock. Also, rising competition from other retailers selling similar clothing at deep discounts didn’t help.
Perhaps most tellingly, EXPR stock also succumbed to a legacy headwind. According to management, its inventory didn’t align with consumer interests. However, as Retail Dive implies, this dynamic might not be entirely Express’ fault. When the Covid-19 pandemic struck, the retailer absorbed an uppercut as its core offering — business-casual attire — fell out of favor. Essentially, it was replaced by plain casual attire.
To be fair, Express hasn’t taken the situation lying down. Over the past several years, the company has overhauled many aspects of its business to improve performance. Notably, in late December, WHP Global — which owns Toys R Us — announced that it would invest $260 million in the apparel specialist in a strategic partnership.
Unfortunately, circumstances have not improved for EXPR stock. Last year in April, management disclosed that it received a notification letter from the New York Stock Exchange regarding failure to meet the exchange’s standards. With the latest severe drop in market value, the clock is ticking for Express to find a substantive solution.
Why It Matters
With news that inflation remains stubbornly elevated, Express’ suppliers may be less willing to ship products. In many ways, this framework mimics that of retailer Bed Bath & Beyond when it struggled to stave off bankruptcy before it finally bit the bullet.
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On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
