An Epically Bad Week for US Brick-and-Mortar Retailers and Landlords

An Epically Bad Week for US Brick-and-Mortar Retailers and Landlords

Winners in this crisis: Ecommerce – for retailers that don’t sell men’s office & formal wear – and for sure, lawyers.

By Wolf Richter for WOLF STREET.

Tailored Brands, a holding company for men’s apparel stores, including Men’s Wearhouse and JoS. A. Bank, is considering filing for bankruptcy, according to sources cited by Bloomberg on June 8. Bankruptcy would allow the company to shut weaker locations while keeping other stores operating, the sources said.

The company confirmed in an SEC filing on June 10 that it may have to file for bankruptcy:

“If the effects of the COVID-19 pandemic are protracted and we are unable to increase liquidity and/or effectively address our debt position, we may be forced to scale back or terminate operations and/or seek protection under applicable bankruptcy laws. This could result in a complete loss of shareholder value,” it said.

But its problems started years ago, including the misbegotten $1.8 billion acquisition of JoS. A. Bank in 2014, whose revenues promptly went into a death spiral. Overall revenues fell every year since 2016.

In an update on June 10, Tailored Brands said that total revenues in the first quarter (ended May 2) collapsed by 60% year-over-year, with even ecommerce sales plunging 32%.

The company started re-opening its stores on May 7, and had 634 stores open by June 5. So how well are these reopened stores doing?

In the week ended June 5, for stores open at least the entire week, average comparable sales at Men’s Wearhouse were down 65%, at Jos. A. Bank 78%, and at K&G 40%.

That total ecommerce sales, including rental services, plunged 32% in the second quarter through June 5th – when retail has largely switched to ecommerce, and everyone else’s ecommerce sales are booming – is a sign that work-from-home has crushed demand for clothes worn to the office; and that the postponements of events such as weddings have crushed the demand for renting formal wear.

Children’s Palace announced on June 11 that it would close “300 additional store locations” – 200 of them in the current fiscal year, and 100 in the next. This would amount to about one-third of its 920 or so locations in the US and Canada. “This initiative will greatly reduce our reliance on our brick-and-mortar channel,” it said.

“We are targeting our mall-based, brick-and-mortar portfolio to represent less than 25% of our revenue entering fiscal 2022,” it said.

In the same breath, the company announced that total revenues had plunged 38% in the quarter, as many of its stores were closed due to the pandemic, with brick-and-mortar revenues collapsing while ecommerce revenues soaring by 300%. Ecommerce won big.

Signet Jewelers said in an update on June 9 that by the end of its fiscal year, it will close “at least” 300 stores in North America – of which “at least” 150 stores won’t reopen at all, and “at least an additional 150 stores” will re-open but will close by the end of the fiscal year. And it plans to accelerate the shift to ecommerce.

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.