In 2024, the retail industry continued to experience significant instability, leading to the financial downfall of several key players. This instability was driven by persistent inflation and evolving consumer preferences, often called “retail distress.” Among the affected, Express filed for Chapter 11 bankruptcy protection. Subsequently, the company announced the closure of nearly 100 stores due to decreased demand impacting its supply chain.
Following the Express bankruptcy, the company faced reduced order volumes, which led one of its logistics partners to minimize the retail distribution services offered to the company.
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Key Takeaways
- Store Closures: After the announcement of Express bankruptcy, the company plans to close 95 retail locations and all 12 UpWest stores, significantly shrinking its physical footprint and impacting distribution needs.
- Distribution Center Layoffs: The bankruptcy has led to layoffs at retail distribution centers, including the one in Columbus, Ohio, due to reduced demand and restructuring efforts.
- Cost-Cutting Measures: Express is streamlining operations and cutting workforce costs to improve financial stability.
- Asset Sales: The company is exploring the sale of assets to stabilize finances during the restructuring process
Express, Inc. Files for Chapter 11 Bankruptcy and Announces Store Closures Amid Acquisition Talks
Express, Inc. announced on April 22 that it has filed for Chapter 11 bankruptcy protection in the U.S. The company will close 95 of its approximately 530 Express stores and all 12 UpWest locations, simultaneously initiating closing sales. Express also oversees the Bonobo brand.
Express has retail locations at Greenwood Park Mall, Hamilton Town Center in Noblesville, Castleton Square Mall, and stores in Lafayette, Bloomington, Merrillville, and Mishawaka. The company also operates factory outlet stores in Evansville, Edinburgh, Michigan City, Fort Wayne, and Schererville.
According to the bankruptcy documents, the Lafayette, Bloomington, Evansville, and Merrillville stores are scheduled to close.
The possibility of bankruptcy had been anticipated earlier in the year. Creditsafe noted that Express had consistently struggled with late payments, a sign of ongoing financial difficulties. Express has announced that the operating hours of the remaining stores will remain unchanged, and the stores will continue to process orders and accept returns as usual.
Other store policies, including the procedures for returning merchandise, along with the use of gift cards and store credits, will stay the same. Additionally, there are no anticipated changes to its loyalty program, Express Insider. Express also mentioned that its Bonobos brand will continue to serve its premium wholesale customers.
However in all this, a consortium led by brand management firm WHP Global is attempting to rescue the company through acquisition.
The company has received a nonbinding letter of intent from a group including WHP Global, Brookfield Properties, and Simon Property Group, expressing their interest in acquiring a majority stake in Express’s retail stores and operations. Kirkland & Ellis is providing legal advice to Express, while M3 remains its financial advisor.
Although the offer is not binding, other parties may express interest. Sycamore Partners, which considered buying Express in 2014, is reportedly considering another bid. WHP holds a significant position with a 7.4% investment in Express and a 60% ownership interest in a joint venture licensing agreement.
CEO Stewart Glendinning stated that the company is actively improving its product selection, increasing demand, enhancing customer connections, and strengthening its operations. He described the bankruptcy filing as a critical move to bolster Express’s financial health and support the advancement of its business strategies. According to Glendinning, WHP has been a supportive partner since 2023, and the prospective deal is expected to supply additional financial resources, position the company for profitable growth, and maximize value for stakeholders.
Express, in the court filing, also mentioned that it secured a $35 million commitment from some lenders for new financing to support its bankruptcy, pending court approval. Additionally, on April 15, the company received a $49 million cash tax refund from the Internal Revenue Service related to the CARES Act.
Founded in 1980 by Les Wexner’s Limited Brands, Express is a business casual apparel brand that has experienced declining sales in recent years. High debt and expensive mall leases negatively affect its operations. In a legal document, Express reported having $1.3 billion in total assets and $1.2 billion in total liabilities as of March 2.
Last spring, in a transaction with WHP, Express purchased Bonobos’ operating assets and associated liabilities from Walmart for $25 million. This acquisition occurred when Express was struggling with weak business performance and limited cash flow, according to Neil Saunders, managing director at GlobalData, in a note issued on Monday.
However, Saunders noted that Express’s primary issue has been a consistent decrease in revenue, which has dropped by about 10% since 2019.
Additionally, the proposed sale to the WHP consortium, acting as the initial bidder, requires securing a definitive deal within 30 days, as stipulated by the $35 million debtor-in-possession (DIP) financing agreement terms. According to Glendinning in the court filing, failure to finalize a deal within this period will necessitate Express transitioning to a structured liquidation process.
In a separate announcement on Monday, Express appointed Mark Still as the senior vice president and CFO. Having served as interim CFO since November 2023 and as senior vice president of brand finance, planning, and allocation since January 2023, Still has been with the company since 2005, ascending through various financial roles.
In its primary Chapter 11 filing, Express reported total assets of $1.298 billion and liabilities of $1.199 billion. Li & Fung was noted as the largest trade creditor with an unsecured claim of $38.6 million. The list of other trade creditors includes manufacturers and sourcing firms from Istanbul, Turkey; Hong Kong, Taipei, and Kowloon, Taiwan, and within the U.S.
Impact of Express Inc. Bankruptcy on Distribution Centers
Express Inc.’s bankruptcy has a substantial supply chain impact on its retail distribution networks. During its restructuring phase, the company intends to shut down more than 100 stores, directly affecting its distribution operations. Specifically, the Columbus, Ohio, distribution center has already announced layoffs in response to diminished product demand.
These adjustments are part of wider cost-reduction strategies to decrease logistics and shipping capabilities. Consequently, distribution centers are experiencing lower volumes, downsizing of operations, and possible changes in logistics partnerships, aligning with Express’s strategy to streamline its business model.
About Express Inc.
Express Inc. is a fashion retailer with multiple brands. It operates specialty apparel stores and sells items such as sweaters, jeans, suits, dresses, and coats, primarily in the United States.
The company has a multi-channel retail approach, including brick-and-mortar stores and an online presence. It operates under two main brand segments: Express, UpWest, and Bonobos. The Express brand is committed to delivering style, quality, and value. UpWest offers clothing, accessories, and home goods, focusing on comfort and sustainability. Bonobos is recognized for its well-fitting menswear and innovative retail approach.
Express, Inc. manages over 500 stores in the United States, Puerto Rico, Mexico, Costa Rica, Panama, El Salvador, and Guatemala. Its headquarters are in Columbus, Ohio.
Conclusion
The retailer’s Chapter 11 bankruptcy filing marks a significant turning point for the retailer and its associated distribution centers. As Express moves to close a substantial number of stores, the supply chain impact on its distribution network is profound, with immediate layoffs and reduced order volumes affecting operations across the board. The company’s decision to streamline operations in response to financial difficulties indicates a broader trend within the retail sector, where agility and cost management are increasingly critical.
While the potential acquisition by WHP Global and other partners may offer a pathway to recovery, the future remains uncertain. As Express navigates this restructuring process, its ability to adapt to changing consumer preferences and stabilize its operations will be vital for its long-term sustainability. The situation reminds us of the challenges faced by retailers in an evolving market, emphasizing the importance of strategic planning and responsiveness in maintaining operational effectiveness amidst financial adversity.
