Women’s fashion chain Christopher & Banks has issued a going-concern warning.
“We have determined that there is substantial doubt about our ability to continue as a going concern. Although we are evaluating several alternatives, it is possible that we will pursue a reorganization under applicable bankruptcy laws possibly as soon as the fourth quarter of Fiscal 2020,” the company said in a regulatory filing Monday with the Securities and Exchange Commission.
The filing was the company’s 10-Q, a quarterly report for the three months ended Oct. 31. Retailers operate under the retail calendar, meaning that their fourth quarter ends around Jan. 29. That scheduling allows retailers to include in their report post-holiday sales that start on Dec. 26 and run through the end of January.
In the filing, the women’s chain also said that the Covid-19 pandemic has had a major impact on its business and the results of its operations. “We have considered the projected impact of Covid-19 on our cash flows and analyzed our future compliance with the financial covenants under the credit facility and the term loan facility,” the retailer said, and concluded that it won’t remain in compliance with certain covenants. The company warned that if it can’t obtain a waiver from its lenders, or amend the terms of the facility, it would be in default under the financing terms.
The retailer’s financial position isn’t looking that great over the near term. “Furthermore, our current forecast for our financial condition and liquidity sources also raises doubt as to our ability to meet other obligations, including interest payments related to our indebtedness and lease obligations over the next 12 months,” the company said in the filing.
It’s already hired strategic advisers, including B. Riley Securities Inc., to help it evaluate alternatives. Under consideration are options that include further lease concessions and deferrals, reductions in operating and capital expenditures, refinancing of debt and a sale of the company.
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Christopher & Banks said it’s still in negotiations with creditors and investors, and that nothing has been finalized.
The company also warned that doubts about its ability to continue operations could have an adverse impact on its relationships with customers and vendors, which could further impact operations.
The retailer’s warning doesn’t come as a surprise. In September, S&P Global Market Intelligence published a report outlining the five apparel and home retailers that its analysts deemed at risk for collapse.
Specialty chain Francesca’s was on that list, and it ended up filing for Chapter 11 bankruptcy court protection on Dec. 3. The company closed 140 stores and then shuttered another 97 shortly after the filing. It now is considering a closure of its headquarters in Houston.
Also on that S&P report was Christopher & Banks. The report said that Christopher & Banks had a one-year probability of default score of 23.1 percent. That’s slightly better than the 12.2 percent score for Francesca’s, which landed at the bottom of a 15-company list.