The vise continues to tighten on retailers as debt piles up and the environment worsens.
Vince delays financial filing, signals possible default
Contemporary label Vince has alerted the SEC that it will delay filing financial results for the fourth quarter and full 2016 fiscal year, ended Jan. 28, 2017.
The brand said the delay is due to a technology issue related to migrating the company from the system operated by Kellwood, its former parent company, to an independent set up. Getting all of its internal and external systems to integrate has resulted in additional steps, causing the delay, which the company says should be resolved in fiscal 2017.
Once the reports for the quarter and year are concluded, Vince anticipates the numbers will be affected by material asset impairment charges related to goodwill and trade name as well as an equity contribution of $1.7 million plus another future contribution to its operating subsidiary, using a portion of its $20 million cash holdings.
The company is assessing its ability to continue as a going concern within one year after its financial statements in light of current trends in the retail business environment, which has resulted in Vince lowering its projections in the past.
The brand also entered into a side letter with Bank of America, giving it the ability to borrow against a portion of the approximately $20 million in cash through July 31, 2017. Chief executive officer Brendan Hoffman said the purpose was to allow for the flexibility to operate more efficiently.
“However, in light of the difficult retail environment we believe that it is prudent to consider a scenario in which we do not meet our financial covenants,” he said. “That said, we have done a lot of work to reset the brand and believe that we are taking the right strategic steps to optimize our wholesale business, expand our direct-to-consumer business and grow our international presence.”
Neiman Marcus takes on more debt
Neiman Marcus Group has elected to make payment-in-kind interest payments in lieu of cash to preserve its liquidity. According to the Dallas News, the retailer will make interest payments from April 15, 2017 to Oct. 14, 2017 by taking on new debt. NMG will issue bonds to holders to cover the 9.5% interest on the $29 million interest due on $600 million notes due 2021.
“While this may help them get through the next few months, issuance of new notes is also adding to very high debt levels,” Gimme Credit LLC analyst Kim Noland told the paper. Declining results could make the capital structure more of an issue, she said, adding she’s also monitoring capital spending.
The company reported it has $105.8 million in cash and cash equivalents on hand and $423.2 million of unused borrowing availability under its $900 million asset-based revolving credit facility.
Last month, rumors swirled that the company announced it was open to a sale, which was quickly followed by rumors that Hudson’s Bay Company might be interested.
NMG’s revenue for the second quarter, ended Jan. 28, dropped 6.1% compared to the previous year period, and comp stores were off by 6.8%.
The company has said it’s looking to remedy the issues by stocking more exclusives and working with vendors to shorten lead times, all in an effort to combat price shopping and service an increasingly buy now, wear now consumer.
Agent Provocateur files for bankruptcy in the U.S.
The U.S. operation for British lingerie firm Agent Provocateur has filed for Chapter 11 to sell assets left after the company’s U.K. bankruptcy in March following accounting irregularities, according to Market Watch.
The company agreed to sell 12 of its U.S. stores to Four Marketing Group, which also purchased its U.K. business and intellectual property. The agency has agreed to provide Agent Provocateur’s U.S. company with a $500,000 bankruptcy loan. It will also serve as a stalking horse bidder during the bankruptcy auction for the stores.
The deal with the U.K. arm cut off the U.S. business from inventory and the right to use the Agent Provocateur name, which would have resulted in a Chapter 7 filing. The U.S. business was worth between $1 million and $10 million in assets and between $10 million and $50 million in liabilities, according to court documents.
Sports Direct has a 25 percent stake in Four Marketing Group, which represents more than 30 brands.