Tailored Brands is contemplating a potential bankruptcy filing to help reduce its debt burden, according to a Bloomberg report that cited anonymous sources. A spokesperson for Tailored Brands did not immediately reply to Retail Dive's request for comment.
The men's apparel retailer is working with law firm Kirkland & Ellis, which has worked on many prominent retail bankruptcy cases, and the investment bank PJT Partners, according to Bloomberg.
The news service reported that the retailer could close some weaker locations to "satisfy its creditors" in bankruptcy. The report noted that plans are still "in the early stages" and that Tailored Brands, owner of Men's Wearhouse, is also seeking alternative forms of financing.
Like scores of its peers, Tailored Brands shut down its store footprint in March, furloughed employees and cut executive pay as the COVID-19 pandemic spread through the U.S. While it began reopening stores last month, the shutdown has wrought financial havoc on distressed retailers in particular.
Tailored Brands — which runs the Jos. A. Bank, Moores and K&G banners along with Men's Wearhouse — has struggled with top-line declines for years, while margins and profits have shrunk. It has tried to turn things around with new marketing campaigns and technology services, but comparable sales declines at Men's Wearhouse actually widened last year. The company's long-term debt stands at about $1.1 billion.
In a March call with analysts, CEO Dinesh Lathi indicated the efforts were producing results. "We were seeing this positive momentum being driven in part by many of the initiatives we've discussed with you over the last few quarters including our efforts in building a more relevant assortment, a robust e-commerce offering and more effective digital marketing," Lathi said, according to a Seeking Alpha transcript.
But starting the first week of March, the retailer's performance "became more uneven" and then it "decelerated" in the second week as local and regional governments started taking actions to slow the spread of the disease, according to the chief executive.
Even as its stores reopen, the business apparel specialist now faces a potential acceleration of casualization in clothing, as workers around the country work from home. Moreover, retail sales in general face uncertainty, with the U.S. in recession and the coronavirus still spreading. Analysts with S&P Global have estimated that discretionary retail and restaurant sales might not return to their 2019 levels for two more years.
The combination of the closures, which was a black hole and has set off tensions between retailers and their landlords and suppliers, has already sent some into bankruptcy, including Stage Stores, Tuesday Morning, J.C. Penney, J. Crew and Neiman Marcus. There are very likely many more to come.