Another U.S. retailer is expecting to close all its stores and liquidate its business.
Francesca's, a Houston-based women's fashion and accessory retail chain, has started liquidation sales with "Everything Must Go" signs at stores throughout the country. Women's Wear Daily reported the going-out-of-business sales started Friday after Francesca's reportedly severed ties with its merchants with the intention of liquidating its merchandise.
One vendor told the industry publication the company was owed $250 million in unpaid invoices, with no correspondence to vendors. Francesca's did not immediately respond to multiple requests for comment from CoStar News.
Francesca's website says all sales made as of Jan. 14 are final, and purchases made prior to that date can be returned within 21 days of receiving the item.
Francesca's liquidation could be tied to its exit from a pandemic-induced bankruptcy in late 2020 under a new ownership group, said Mike Geisler, founder and managing principal at Dallas-based Venture Commercial Real Estate. Geisler has no inside knowledge of the retailer's business, but has worked in the industry, advising retailers on their real estate, for decades.
"They seemed to never have recovered from the impact of COVID on its business," Geisler told CoStar News. "When they were bought, they likely had new operations people who couldn't figure out how to run it like the prior operational group. There's a science and art to retailing." If you disturb it, he said, it can lead to business challenges.
Francesca's, founded in 1999, filed for Chapter 11 bankruptcy protection in late 2020, when it was also delisted from Nasdaq. The business was purchased in early 2021 in an $18 million deal by Francesca's Acquisition, an affiliate of TerraMar Capital and Tiger Capital Group.
Nearly 100 stores closed during the bankruptcy process, but Francesca's new ownership group was able to renegotiate leases with several landlords and had at least 460 retail locations open as of June 2021, CoStar News reported. The company had about 700 stores at the beginning of 2020 before the pandemic.
The retailer is touting its 25th anniversary on its website, saying it has 457 stores in 45 states with more than 3,400 employees.
John Zikos, a principal at Venture Commercial, said he believes the exit of Francesca's could make room for new concepts, with the expected closures likely reflecting the current fractured retail industry.
"The high-end stores are doing well, and the lower-end stores are doing well; it's the guys in the middle that aren't doing well, and I see Francesca's as being in the middle," Zikos said. "Stores need to offer great customer service or bargains at the other end of things. The middle just isn't exciting."