Houston-based Stage Stores filed Chapter 11 bankruptcy and is seeking potential buyers. Stage banners include Gordman’s, Bealls, Goody’s, Palais Royal, Stage and Peebles, and the 738 stores will begin liquidating stores upon reopening to wind down operations.
Stage operates 21 stores in Arkansas and will begin reopening 557 locations on May 15, with 67 more expected to reopen May 28. Stage said the entire chain will reopen by June 4, the company said Monday (May 11).
The move comes after the company’s failed attempt to operate purely as a discounter under the Gordman’s banner. Company officials said they are still hoping for a buyer to step up, but liquidation plans will have to begin immediately.
“This is a very difficult announcement and it was a decision that we reached only after exhausting every possible alternative,” said Michael Glazer, president and CEO. “Over the last several months, we had been taking significant steps to attempt to strengthen our financial position and find an independent path forward. However, the increasingly challenging market environment was exacerbated by the COVID-19 pandemic, which required us to temporarily close all of our stores and furlough the vast majority of our associates. Given these conditions, we have been unable to obtain necessary financing and have no choice but to take these actions.”
Stores have been closed since late March and all employees furloughed. As employees are called back to work the liquidation sales, the company plans to use cash collateral for its temporary liquidity needs to support the business through Chapter 11. The court will have to approve that measure, but Stage said employees will be paid and receive no interruption in health benefits as they return to work through the liquidation.
Kirkland & Ellis is acting as the company’s legal adviser and PJ Solomon its investment banker. Other professionals include Berkeley Research Group as restructuring adviser, A&G Realty as real estate adviser and Gordon Brothers Retail Partners, which will manage inventory clearance sales.
Stage is the third retailer to file bankruptcy in May following J. Crew’s filing on May 4 and Neiman Marcus filing on May 7. Each company cited the coronavirus shutdown as the catalyst. The three retailers were struggling before COVID-19 emerged, with disappointing holiday sales and failed attempts to breathe life into their operations.
Mark Cohen, director of retail studies at Columbia University, said COVID-19 will hasten the demise of many retailers that went into the crisis overloaded with debt or in a weak financial position. He predicts one-third of U.S. malls could close for good. He said retailers that fail to differentiate themselves with exceptional service or trademark brands will have a hard time surviving.
Cohen predicted retail bankruptcies could escalate 10-fold this year as the dust settles by early summer. Jan Kniffen, a retail consultant with J. Rogers Kniffen Worldwide, said it could take two years before mainstream retail rebounds and it will be difficult for most retailers to last that long.