The Brick-and-Mortar-Retail Meltdown in January

The Brick-and-Mortar-Retail Meltdown in January:

‘Tis the season for bankruptcies.

Sears Holdings, which has been on a highly effective hedge-fund-manager-designed program of cost-cutting itself to death, announced today that it obtained another $100-million loan from JPP, LLC and JPP II, LLC, which are solely owned by said hedge-fund manager and CEO of Sears Holdings, Eddy Lampert. After prior loans by the same entities and by Lampert’s hedge fund ESL were secured by the part of real estate that hadn’t been sold off in sweetheart deals to affiliated parties, the new loan is secured “by certain real property interests” and by “substantially all of the unencumbered intellectual property of the Company and its subsidiaries” except the IP related the Kenmore and DieHard brands.

Stripping out while the stripping is still possible.

Yesterday, Sears announced another step in cost-cutting itself to death: axing 220 jobs mostly at its corporate office. This was part of its stated goal to trim $1.25 billion from its annual expenses. After closing hundreds of Sears and Kmart stores last year, the company is on track to close 63 more stores in January. This will leave it with 1,041 Sears stores, down from 3,555 in 2010, and with about 500 Kmart stores.

But sales are dropping even faster. In Q3 2017, the last quarterly report available, revenues fell to $3.7 billion, down 26% year over year and down 68% from Q3 2007.

Sears shares [SHLD] currently trade at $2.41, down 6% for the day, and down from the Lampert-hype induced 52-week peak of $14 on April 19, 2017. Day traders are having fun riding them all the way to zero.

A bankruptcy filing will occur after Lampert runs out of assets to strip. Now he’s going after Sears’ IP, meaning he’s scraping the bottom of the barrel.

Bon-Ton Stores, which had hired bankruptcy advisors in September, announced some details yesterday on a new wave of store closings in early 2018, involving 42 stores. Bon-Ton has taken on a third-party liquidator to get rid of the merchandise in those stores. Liquidation sales begin today.

On December 15, Bon-Ton failed to make a $14-million interest payment and opted to take the 30-day grace period instead. After the grace period expired, Bon-Ton announced on January 16 that it had entered into forbearance agreements with some of its lenders. These lenders agreed not to exercise the remedies available to them to go after the missed payment. That agreement expired on January 26…. A bankruptcy filing is imminent. Bon-Ton shares [BONT] are trading at 16 cents. They’re goners

Stein Mart, with about 290 off-price stores in the US whose same-store sales had fallen about 7% in Q3 year-over-year, after having fallen 4.6% in the prior year, announced on Monday that, “given the continuing challenges of the retail environment,” it has formed a special committee to “review our strategic options,” “explore all opportunities,” and “identify potential strategic alternatives.”

Since the announcement on Monday, shares have plunged 42% to 65 cents. They too are goners.

Nine West Holdings – which focuses on women’s shoes, accessories, jeans, jewelry, and handbags sold at its own stores and at department stores – became subject of intense bankruptcy rumors on January 24, when “people with knowledge of the negotiations” told Bloomberg that the company was negotiating with some of its creditors on a prepackaged Chapter 11 bankruptcy filing before an interest payment comes due on March 15.

It would include restructuring nearly $1.5 billion in debt, sell parts of the retailer, make first-lien lenders whole, hand a majority of the equity of the reorganized company to unsecured term-loan lenders, and hand a small part of the equity to bondholders as a consolation prize. These bonds traded at 11 cents on the dollar.

The retailer was acquired by private-equity firm Sycamore Partners as part of its $2.2 billion leveraged buyout of Jones Group in 2014. Sycamore is becoming an old hand in failed brick-and-mortar retailers, including its portfolio company Aeropostale, which filed Chapter 11 bankruptcy in May 2016.

An astounding list of the meltdown: How PE firms doomed the brick-and-mortar retailers. Read… The Private Equity Firms at the Core of Brick & Mortar Retail Bankruptcies

H/t reader eric:

“Seems good old Sears is being systematically dismantled and slowly re-channelled into either private or Hedge Fund ownership so that when it eventually collapses under the weight of recessionary debt, only the employees get screwed.

Capitalism folks…works for the few, and the jew.”

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