With a potential bankruptcy filing on the horizon, RTW Retailwinds Inc. has warned that it could close all of its stores across the country.
The apparel and accessories company wrote in a filing this week with the Securities and Exchange Commission that the coronavirus pandemic — which forced the two-month shutdown of its brick-and-mortar fleet and subsequently halted in-store traffic — had materially adversely impacted its cash flow. It raised “substantial doubt” about its ability to continue as a going concern.
“The company may not be able to mitigate the impact COVID-19 has had and will have on its business,” it said, “and has been considering available options, including restructuring its obligations or seeking protection under the bankruptcy laws, in which case there will likely not be any value distributed to its shareholders and its shares could be cancelled for no consideration.”
Prior to the outbreak, RTW Retailwinds — owner of New York & Company units — announced plans to close 150 stores over the next year and a half as part of its digital transformation. However, should it file for Chapter 11 protection, the company said that it could shutter more than 150 locations or even its entire fleet of 387 outposts, including 116 outlets, in 33 states. It added that many of its stores are found in shopping centers or malls, which are already struggling to meet mortgage terms as retail tenants fail to make rent payments.
As of Feb. 1, roughly 70% of RTW Retailwinds’ store leases can be terminated within two years, while about 90% of leases approach their end within five years. The company, which began reopening its stores during the first week of June, expects all of its units to reopen — barring any new developments — by the last week of the month.
RTW Retailwinds’ struggles had preceded the current health crisis: In the 2019 fiscal year, it reported a 7.4% drop in revenues to $827 million, while profits declined from $4.2 million, or $0.06 per share, in the prior year to a $61.6 million loss, or 96 cents per share. Comparable store sales fell 5.4%.
Early this week, the company entered into a forbearance agreement with Wells Fargo after it had defaulted on its credit facility terms. It does not have any other borrowing facilities and said that, without seeking bankruptcy protection, it “does not have the ability to raise additional capital at this time.”