“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,” Michael Glazer, the company’s chief executive, said in a statement. “Given these conditions, we have been unable to obtain necessary financing and have no choice but to take these actions.”
The crisis has ushered in a new wave of trouble for U.S. retailers, many of which were already struggling with large debt loads and dwindling store traffic years before the coronavirus pandemic forced weeks-long store closures. J. Crew and Neiman Marcus filed for bankruptcy protection last week, and analysts say others are nearly certain to follow.
The latest bankruptcies and store closures, they say, will disproportionately affect the country’s lower- and mid-tier shopping malls, many of which have also been gutted by widespread vacancies. Losing an anchor department store, analysts say, will only hasten their demise.
Stage Stores will begin liquidation sales at 550 stores Friday, with others following suit in coming weeks. The company’s stock plunged 22 percent after the announcement. Its shares are down more than 95 percent this year.
Department store chains and mall-based retailers that sell clothing, housewares and other discretionary goods are at particular risk, analysts say. Americans are increasingly shopping online instead of at malls, and analysts say that dynamic is likely to solidify in the coming months, even as states and municipalities begin lifting stay-at-home orders.
Since 2017, Stage has spent millions converting its department stores into Gordmans locations to compete with discounters such as T.J. Maxx and Burlington Coat Factory. The efforts had been largely successful: Same-store sales — a closely watched measure at stores that have been open for at least one year — rose more than 17 percent in the most recent quarter.
But analysts said those gains were not enough to protect the company from the coronavirus pandemic, which forced it to temporarily close its stores and furlough nearly all of its employees in March.
“The coronavirus situation has hit the company hard and has exposed many underlying weaknesses of the business,” Neil Saunders, managing director of GlobalData Retail, wrote in a note to clients on Monday. “Foremost among these is the poor cash position. The company has very few cash reserves.”
In its bankruptcy filing, Stage said it owes between $500 million and $1 billion to more than 10,000 creditors, including Nike, Skechers, Ralph Lauren, Levi Strauss and Adidas. The company reported $1.58 billion in annual revenue in 2018.