Struggling retailers Eddie Bauer and Francesca's have both filed for bankruptcy protection and plan to close their combined roughly 600 stores if they don't find last-minute buyers for their separate businesses.
Bellevue, Washington-based Eddie Bauer, a supplier of outdoor apparel and gear, on Monday said it had commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of New Jersey. The company, which operates 175 stores in the United States and Canada, has drawn interest from two potential buyers for part of its operations, according to court filings. Eddie Bauer is looking to potentially use one of them as a stalking-horse bidder.
And in a separate action, Houston-based Francesca's, a seller of women's apparel that's a fixture in several malls, filed for Chapter 11 late last week, also in the bankruptcy court in New Jersey. It has about 400 stores.
Eddie Bauer and Francesca's are both still marketing their businesses to potential buyers even as they hold liquidation sales across their store fleets, according to court documents. Both chains have previously filed for Chapter 11, with Eddie Bauer seeking bankruptcy protection twice before and Francesca's seeking it once before.
There's already been a spate of retail bankruptcies this year, most notably last month's Chapter 11 filing by Saks Global, the parent of Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman. And store closings are starting to pile up. Year-to-date as of Friday, U.S. retailers have announced 1,824 stores closings and 1,259 store openings, according to Coresight Research. The list of stores going dark includes nearly 70 Saks Off 5th and Last Call locations, roughly 20 Allbirds stores, around 60 Amazon Fresh stores and the entire American Signature Furniture fleet.
Eddie Bauer said it has entered into a restructuring support agreement with its secured lenders. The entity that filed for Chapter 11 operates Eddie Bauer's North American stores under a licensing agreement with Authentic Brands Group, owner of the intellectual property. The brick-and-mortar retail business is part of Catalyst Brands, which was formed last year by the merger of SPARC and JCPenney, which Simon Property Group and fellow mall landlord Brookfield bought out of bankruptcy in 2020.
Evaluating options
Authentic Brands is continuing Eddie Bauer's North American manufacturing, e-commerce and wholesale operations through a new licensing deal with Outdoor 5.
The decision to wind down Eddie Bauer was a difficult one and followed an evaluation of all its options, according to Catalyst Brands CEO Marc Rosen. For some time now, Eddie Bauer has faced declining sales and supply-chain problems, he said in a statement.
"Over the past year, these challenges have been exacerbated by various headwinds, including increased costs of doing business due to inflation, ongoing tariff uncertainty and other factors," Rosen said. "While the leadership team at Catalyst was able to make significant strides in the brand, including rapid improvements in product development and marketing, those changes could not be implemented fast enough to fully address the challenges created over several years.”
Eddie Bauer has received two non-binding indications of interest relating to some of its assets, according to an affidavit by Reid Snellenbarger, co-head of Solic Capital Advisors, the investment banking firm that the retailer is working with. As a result, Eddie Bauer plans to continue to market its properties and "determine if and which of its potential purchasers should be signed up as a stalking-horse bidder," he said.
The retailer has until Feb. 27 to choose and submit a stalking-horse bidder to the court if it decides to do so, opening the door for the full-store winddown to be stopped, according to court documents.
Like Eddie Bauer, Francesca's had already kicked off store-closing sales before filing for bankruptcy protection. The specialty women's apparel seller reiterated its financial woes, first outlined in a layoff notice to labor officials in Texas, in court documents.
"Macroeconomic factors that have disrupted the retail industry generally have also impacted the company, including shifts in the competitive landscape, a move toward online channels, supply chain issues and increased costs of goods and services due to inflation, among other factors," Curt Kroll, Francesca's chief financial officer, said in an affidavit. "The company has explored every reasonable option to overcome these hurdles."
Not a 'retail apocalypse'
Amid the pandemic, the chain closed roughly 200 unprofitable stores and restructured some leases, Kroll said. But a subsequent data breach and a disruptive e-commerce upgrade further roiled the retailer, according to Kroll. Then an expected cash infusion fell through in January.
The recent closings and bankruptcy filings don't represent a mass failing by brick-and-mortar retail, according to Neil Saunders, a retail analyst and managing director at analytics firm GlobalData. They reflect weaknesses in the specific chains involved, he said in an email to CoStar News.
"The failures of Eddie Bauer and Francesca’s do not represent the collapse of retail or a retail apocalypse," Saunders said. "They are both brand failures in that neither brand did enough to stay relevant and to compete successfully."
There are a number of retailers in the same sector as Francesca's and Eddie Bauer that are performing well "like PacSun in the youth market or Arc’teryx in outdoor wear," according to Saunders.
"Unfortunately, the retail market is very exacting right now so the price of not doing the right thing for the customer is very high," he said. "Both Eddie Bauer and Francesca’s have paid that price."
In response to Saunders' comments, Authentic Brands said it is in fact taking a new approach to Eddie Bauer.
“Our priority is making Eddie Bauer's heritage in the outdoors meaningful for today’s consumer through technical innovation, modern design and the right channel mix," David Brooks, executive vice president of action, outdoor sports and lifestyle at Authentic Brands, said in a statement.
"By elevating performance lines ... strengthening our digital experience and expanding wholesale partnerships, we’re ensuring the brand shows up where customers are shopping and with products that genuinely meet their needs," Brooks said. "It’s about building on what Eddie Bauer has always stood for while evolving it for how people live and explore today.”
Francesca's has long been in decline, according to Saunders.
"Even before its previous pandemic bankruptcy filing, Francesca’s was losing ground with audiences, especially teen girls," he said. "There was a small rally after bankruptcy, but it was insufficient to revive the chain. The core issue is that Francesca’s has not inserted itself into the culture or lives of younger consumers to maintain relevance. The brand has become less visible to shoppers and has lost out to alternatives."
Francesca's declined to comment on Saunders' remarks.
For the record
Kirkland & Ellis, Cole Schotz and Osler, Hoskin & Harcourt are serving as Eddie Bauer's proposed legal counsel, BRG is serving as its proposed financial adviser, Solic Capital Advisors is serving as its proposed investment banker and Reevemark is serving as communications adviser.
Tiger Group, SB360 Capital Partners and GA Group are acting as advisers to Francesca’s.