Stage Stores Inc. filed its second Chapter 11 petition for bankruptcy court protection, the latest retail chain to crumble in the face of the coronavirus pandemic.
The Houston-based firm filed in a hometown bankruptcy late Sunday night, listing assets and liabilities each at between $500 million and $1 billion. The department store operator, whose store base totaled about 700 at the end of 2019, said it would try to find a buyer as a going-concern sale, while also conducting an orderly wind-down of operations. Stage’s first bankruptcy filing came in 2000.
The company’s expected petition starts the week off with a bang, compounding a period of coronavirus-induced tumult that saw Aldo Group, Neiman Marcus Group, John Varvatos, J. Crew Group and J. Hilburn all file in a four-day span. J.C. Penney & Co. Inc. is also leaning towards a bankruptcy filing later this week, sources said. Other fashion companies are likely to follow, given that store closures have largely choked off revenues for an intolerable stretch of time.
The current plan, presuming no buyer turns up, would see 557 stores reopen on May 15 to begin inventory liquidation. A second group of 67 doors is expected to reopen on May 28, and the balance will open on June 4. Stage operates department stores in small towns and rural communities, while its off-price Gordmans concept is geared towards non-rural, mid-sized Midwestern markets.
President and CEO Michael Glazer said Stage reached the “very difficult” decision to pursue bankruptcy “only after exhausting every possible alternative.”
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“Over the last several months, we had been taking significant steps to attempt to strengthen our financial position and find an independent path forward,” he added.
The struggling chain was in the process of converting its department stores to its Gordmans off-price concept. The company acquired the bankrupt Gordmans nameplate, certain intellectual property assets and some of its stores in 2017. It was trying to transition its nameplates–Stage, Bealls, Palais Royal, Peebles, Goody’s–to Gordmans when the coronavirus pandemic hit. The retailer has been attempting to negotiate with its vendors and landlords on payments owed for goods and rents in order to stay in business. At the end of March, the company began furloughing store employees and slashed executive compensation to preserve cash.
“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,” Glazer said.
The CEO credited landlords and vendors for working “constructively with us to try and avoid this outcome. We hope that their efforts and actions we have taken to reposition the business over the last several months will help attract the right partner who is interested in our off-price concept.”
Ironically, Stage itself was cobbled together partly through the acquisitions of retail nameplates that had gone bankrupt. Founded in 1988, Stage operated under the name Specialty Retailers Inc., when a group of venture capitalists, including a $5 million investment from Bain Capital, combined Bealls and Palais Royal in a deal valued at $300 million that was funded by cash and junk bonds. The company began operating small specialty stores under the name Stage Stores when it acquired Fashion Bar Inc.
Stage completed its initial public offering in 1996, and Bain sold its remaining shares in the company the next year. Three years later, overburdened by high debt left over from its private-equity days, the retailer filed for bankruptcy and exited a year later in 2001. Stage subsequently acquired Peebles Inc. in 2003, and went on to acquire bankrupt Goody’s Family Clothing Inc. in 2009 and later Gordmans Stores Inc. in 2017, both at bankruptcy court auctions.