This could be the next major retailer facing bankruptcy

This could be the next major retailer facing bankruptcy

Here’s why Custom brands (TLRD), which is owned by Men’s Wearhouse, Jos A. A. Bank and K&G, could be the next major US retailer to file for bankruptcy.
“The company has had bankruptcy advisers for a few months now. It is examining all its options and is not 100% submissive, but the chances are quite high,” said Reshmi Basu, a retail bank expert and Debtwire analyst who monitors problem companies. “There’s not going to be that much demand given the work from the home environment.”
Some national retailers have already filed for bankruptcy during the pandemic, including J.Crew, Neiman Marcus and JCPenney. The retail clothing industry has been hit hard by the crisis as consumer demand for new clothes has plummeted. Gap (GPS) reported a loss of $ 932 million in the first quarter.
Other companies at risk of bankruptcy include: Ascena Retail Group (ASNA), owner of the clothing chains Lane Bryant, Justice, Ann Taylor and Dress Barn, who recently warned that there is a “substantial doubt” about his ability to stay in business.

Tailored Brands has revealed that it is in danger of going bankrupt or even closing down businesses due to the Covid-19 crisis in a file on Wednesday afternoon.

“If the effects of the Covid-19 pandemic are prolonged and we are unable to increase liquidity and / or deal effectively with our debt situation, we may be forced to reduce or terminate operations and / or seek protection under the current bankruptcy laws, “he said. The company said it had no comment other than the deposition.

The company suspended rent payments for April and May when most of its locations closed. She said she was able to negotiate rental delays for a significant number of her stores, by repaying later, starting in late 2020 to 2021. She also took over or fired 95% of its 19,000 employees.

But things did not go well in the 44% of Tailored Brands stores that reopened in early May. For the week ending June 5, sales at open sites for at least a week fell 65% on Men’s Wearhouse and down 78% on Jos A. Bank and 40% on K&G.

Sales fell 60% in the first quarter, ending May 2nd. All of its stores were closed for about half a quarter and its online activities stopped for two weeks in March. However, the Tailored Brands have been slow to report its full results – the Capital Market Commission is allowing companies to postpone reports during the pandemic.

One reason for the delay is that it weighs how much it has to pay to record the value of various assets, including the goodwill it brings to its books – a measure of a brand’s value and a company’s reputation. Charging will clearly be an accounting move that does not involve cash, but it could increase the cost of borrowing money that the company has to overcome the crisis.

Tailored Brands had $ 201 million available in unlimited cash since June 5, but that’s mainly due to the fact that it dropped $ 310 million on existing credit lines in the first quarter. He left that with just $ 89 million in loans available under these lines.

The company has about 1,400 stores in the United States and Canada, about half of which are called Men’s Wearhouse. Most likely, a significant percentage of them will have to close what is happening with their reorganization efforts, Basu said.

“This is the company that has the legs it needs to get things back on track,” he said. “But consumer tastes and demand are going to change. They’re going to go bankrupt with a much smaller footprint.”

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