Francesca’s Holdings Corp. is set to shutter dozens of stores as it inches toward a possible bankruptcy.
In a filing with the Securities and Exchange Commission, the apparel and accessories retailer announced plans to permanently close roughly 140 locations by the end of January. It expects to incur total impairment charges of about $29 million to $33 million as a result of the move, depending on factors such as the timing of the closures and the outcome of negotiations with third parties.
What’s more, the ailing chain shared that, as previously disclosed, it is evaluating alternatives to improve its liquidity and financial position, including lease concessions and deferrals, further reductions of operating and capital expenditures and raising additional capital. It added that it could seek a refinancing of its debt or restructuring under Chapter 11 proceedings.
“If the company is unable to raise sufficient additional capital to continue to fund operations and pay its obligations, the company will likely need to seek a restructuring under the protection of applicable bankruptcy laws,” it wrote in the filing. “The company’s strategic plans are not yet finalized and are subject to numerous uncertainties, including negotiations with creditors and investors and conditions in the credit and capital markets.”
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Over the past several months, as the coronavirus pandemic tightened its grip on the United States, the Houston-based business took steps to reduce expenses and manage its cash flow following the temporary shutdown of its brick-and-mortar fleet. It also furloughed “substantially all” of corporate and store workers in mid-April and reduced the base salaries of its senior leadership team.
In mid-September, the company’s stock plunged double-digits on the heels of its dismal second-quarter financial report. Francesca’s lost $17.2 million in profits, or $5.80 per share, in the three months ended Aug. 1, compared to a profit of $1.8 million, or 61 cents per share, during the same period last year. Revenues declined 29% to $75.7 million, while its comps fell 5%. It also revealed at the time that it had hired investment banking firm FTI Capital Advisors to help its business.
As of Sept. 4, the retailer’s cash and equivalents totaled $18.2 million. It had $12.2 million of borrowings outstanding, with $3 million available under its asset-based lending and term loan credit agreements. Francesca’s has about 700 stores across 48 states.