Stage Stores, the Houston department store chain behind Palais Royal, Bealls and Gordmans, has filed for bankruptcy, the latest retailer to fall victim to changing consumer preferences and the economic fallout from the novel coronavirus.
The retailer, which filed for Chapter 11 bankruptcy Sunday evening in federal court in Houston, said it is looking for a buyer as it plans to reopen its more than 700 stores in the coming weeks to liquidate its inventory. Stage Stores was reportedly considering seeking bankruptcy protection after a dismal holiday season, but the global pandemic, which temporarily closed thousands of department stores nationally, made it impossible for the retailer to get financing to continue operations, the company said.
The retailer listed assets and liabilities of between $500 million and $1 billion each, according to its bankruptcy filing.
“Over the last several months, we had been taking significant steps to attempt to strengthen our financial position and find an independent path forward,” Chief Executive Michael Glazer said in a statement. “However, the increasingly challenging market environment was exacerbated by the COVID-19 pandemic, which required us to temporarily close all of our stores and furlough the vast majority of our associates. Given these conditions, we have been unable to obtain necessary financing and have no choice but to take these actions.”
BANKRUPTCY RUMORS: Shares of Stage Stores plunge amid bankruptcy speculation
Department stores, once grand emporiums that anchored suburban malls and put small towns on the map, have lost much of their luster over the decades as big-box and online retailers have lured customers away. Sears, once the world’s largest department store chain, filed for bankruptcy in 2018, followed by Barney’s in 2019. Macy’s and JC Penney have closed hundreds of stores in recent years.
But the coronavirus pandemic threatens to deal a knockout punch to embattled and debt-addled department stores. Sales of apparel and accessories fell by more than half in March, when states began imposing stay-at-home orders and mandating non-essential malls and retailers to temporarily close. Neiman Marcus, an icon among luxury department stores, filed for bankruptcy last week, followed by J Crew.
Stage Stores in late March temporarily closed all of its 738 stores and furloughed “virtually all” of its employees. Only 80 “key associates” who perform essential functions have not been furloughed. The company also reduced executive compensation by at least 25 percent, and said its board of directors will not receive compensation during the furlough.
Before the virus upended the world, Stage Stores was investing $30 million to convert its aging department stores into Gordmans locations, staking the company’s future on the still-flourishing off-price segment of the retail industry. Gordmans — similar to TJ Maxx, Ross and Burlington — sells brand-name apparel, accessories, shoes, home and pet goods at a fraction of the price of typical department stores.
The conversions, which cost about $40,000 per store, were expected to wrap up by the third quarter. But now, Stage Stores is planning to reopen its shuttered stores starting May 15 to close out its inventory and wind down operations. The retailer plans to honor gift cards and returns for the first 30 days after a store reopens.
OFF-PRICE PIVOT: Department store chain pivoting to new Stage
Stage Stores began in 1988 with the merger of Palais Royal and Bealls, two family-owned department store chains founded in the 1920s in Texas. The company acquired department stores in small towns without access to malls and other apparel retailers. Today, about 60 percent of Stage Stores’ locations are in towns with fewer than 50,000 residents.
Stage Stores has approximately 700 department stores and 11 distribution centers in 42 states, mostly serving shoppers in small towns and rural markets. The company, which has more than 30 Houston-area locations, employs 14,694 employees nationally, according to the company’s bankruptcy filing.
The retailer reported a loss of $15.9 million on revenue of $399 million during its third quarter ended Nov. 2, the most recent period for which the company reported earnings. The company in January said its same-store sales during the holidays grew only 1.4 percent, missing Wall Street expectations. The company had $1.6 billion in revenue in 2019, according to its bankruptcy filing.
Stage Stores’ largest creditors include Nike, Skechers, Ralph Lauren, Levi and Adidas, according to bankruptcy filings.
The company’s stock fell 22 percent to 37 cents in pre-market trading Monday.