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Francesca’s Has Too Many Stores and They’re Bleeding the Company’s Cash

Store closures are piling up at one hard-hit retailer.

Women’s budget fashion chain Francesca’s is planning to shutter another 97 stores on top of the previously announced scheme to kill up to 140 doors.

The retailer, which succumbed to Chapter 11 last week after adopting a so-called poison pill or shareholder rights plan last year to stave off takeover-hungry activist investors, detailed in a Delaware court filing plans to have newly hired Tiger Capital Group assist with store closures. Francesca’s, which already closed 137 locations before it filed for bankruptcy, said the 97 new locations on the chopping block are all “underperforming relative to lease costs.” It’s now shutting down a total of 234 locations.

Filed under the name Francesca’s Holding Corp., the Chapter 11 petition listed estimated assets of $274.7 million and estimated liabilities at $290.5 million.

Among the top five unsecured creditors listed were: Premium Outlet Partners, Indianapolis, Ind., a part of Simon Property Group, $573,636 for unpaid rent; Esung New York, Valley Stream, N.Y., trade claim of $542,908; Tanger Properties Ltd. Partnership, Greensboro, N.C., $535,829 for unpaid rent; Arc Textiles Inc., DBA Sofi Angel, Los Angeles, Calif., trade claim of $492,694, and Jolie Clothing, Los Angeles, Calif., trade claim of $437,969. Simon was listed again among the top ten for another $357,370 for unpaid rent.

Andrew Clarke, president and CEO of Francesca’s, said in a declaratory statement filed with the court that as of Dec. 1, the retailer operated 558 doors across 45 states and the District of Columbia, an e-commerce website and its recently launched mobile app. Forty-seven percent of stores are in malls, with 38 percent dotting strip malls and off-mall locations, and the remaining 15 percent of doors operating in closed and open-air outlet centers. Stores span 1,000 to 2,000 square feet.

Clarke joined the company on March 9, as the retailer and employer of 4,540 wrestled with turnaround initiatives. Clarke said the coronavirus pandemic weighed heavily on Francesca’s sales “along with the approximately $36.8 million in deferred lease obligations and unsustainable on-going rent obligations have necessitated the debtor’s Chapter 11 filing.” For the fiscal year ended Feb. 1, Clarke said the chain posted net sales of $407.5 million.

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Apparel comprises 55.1 percent of total sales, followed by jewelry at 24.6 percent, accessories at 11.8 percent and gifts at 8.6 percent. “The majority of the debtors’ merchandise is unique to Francesca’s. The debtors’ buyers collaborate with vendors to place special orders and to modify presented styles based on current fashion trends and the buyers’ in-depth knowledge of customers’ preferences,” Clarke said. Francesca’s, he added, employs a fast-fashion model that leans on vendors’ short production lead times to maximize speed-to-market. Most suppliers are in the U.S. but source both domestically and overseas.

“It generally takes four to sixteen weeks from the time an order is placed to the time merchandise is available on the boutique floor,” he stated in the court document. “Short lead times enable the debtors to make more informed buying decisions in terms of customers’ merchandise expectations, and to quickly react to changing fashion trends.”

The chain has a letter of intent from TerraMar Capital for $23 million to be the stalking horse bidder at a court-approved auction.