Popular mall retailer plans Chapter 11 bankruptcy, suitors emerge

Covid devastated malls and mall-based retailers. It wasn't just that shopping centers had to close for periods or that they operated for months under social-distancing rules.

Instead, the biggest factor may have been that people's consumption patterns changed. Mall visitors still bought gourmet pretzels and Cinnabons, but they didn't need to purchase clothes at the level they had previously.

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That led to fewer mall visits, because when you don't need anything, and you're worried about catching a virus, the lure of a snack might not be enough to get you to leave the house. Those trends, however, have changed.

"Malls experienced a rocky few years as pandemic-related restrictions and economic headwinds kept many shoppers at home, and visits to all mall types in 2021 were between 10.7% to 15.3% lower than in 2019. But foot traffic trends improved significantly in 2022 – likely due to the fading out of Covid restrictions," according to Placer.ai. "By 2023, visits to the wider Shopping Center Industry were just 2.3% lower than they had been in 2019."

That's an impressive comeback, but it may not be fast enough for one national mall retail chain that has reportedly been considering bankruptcy.

Express has struggled

Express (EXPR) has been struggling since the Covid pandemic. The company has tried to paint a positive picture of its ability to turn things around. That's how CEO Stewart Glendinning framed the company's situation during its third-quarter earnings call.

"After joining the business, a little under three months ago, my focus has been on the pathway to recovering the company’s full profit potential. This includes accelerating our cost reduction initiatives and launching new ones intended to improve our business performance and liquidity," he said.

Those efforts have not been fully successful.

"Our third-quarter sales and diluted loss per share came in below the low end of our outlook ranges. The macroeconomic environment remains challenging and the consumer and competitive landscapes were highly promotional," the CEO added.

Glendinning did, however, try to share some positive news. 

"While there’s more work to be done to improve year-over-year sales results, there were several positive indicators in the quarter. Our sales performance improved sequentially from Q2, we realized $30 million of cost savings, which drove a 4% reduction in SG&A and we saw real improvement in women’s sales driven by the shift in our merchandising strategy, and while traffic was weaker than expected, our conversion rates were higher than last year," he added.

Express considering filing for Chapter 11 bankruptcy

Express has been consulting with its advisors about a potential bankruptcy filing, but it does have some suitors who may help it through the Chapter 11 process,

"WHP Global, a brand manager that owns Express shares as part of a 2023 partnership, is among a handful of firms considering buying the troubled apparel chain as part of Chapter 11 proceedings, said the people, who could not be named discussing private preparations," Bloomberg reported. "Other prospective bidders include the private equity firm Sycamore Partners, the people said. Representatives for Sycamore Partners, Express, and WHP declined to comment on the plans.

A Chapter 11 bankruptcy filing could happen as soon as this week (the week of April 21) but no final decision has been made.

Rapid Ratings, which tracks public financial information for publicly traded companies, sees Express as a high default risk and has warned its customers to begin risk mitigation.

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"These companies are typically profitable with potentially strong margins but may carry aggressive debt loads with poor liquidity, making them vulnerable to any operational shocks such as loss of a key client," the site shared.