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Bankrupt Stein Mart To Close Nearly All Stores, Even As Online Home Goods Sales Soar

TOPLINE

Stein Mart, the Florida-based retailer that brought discount decor and clothing to middle- and upper-end neighborhoods, filed for bankruptcy protection Wednesday, four months after a scuttled merger; becoming the latest retailer to do so, but one of the few vowing to also largely get out of the brick and mortar business.

KEY FACTS

The Jacksonville-based retailer had warned in June that it didn’t think it could survive the Covid-19 pandemic, according to the Dallas Morning News, and said in Wednesday’s court filing it expects to close a significant portion, if not all, of its 281 brick-and-mortar stores and has launched a “store closing and liquidation process.”

Hunt Hawkins, both chief executive and chief financial officer of Stein Mart, in a statement blamed the filing on “the combined effects of a challenging retail environment coupled with the impact of the coronavirus (Covid-19) pandemic [which] have caused significant financial distress on our business,” adding that the best strategy now to “maximize value will be a liquidation of … assets pursuant to an organized going out of business sale.”

While the pandemic, and the attendant lockdown orders, have been especially unkind to non-food retailers — the line of bankrupt companies forms to the left — discounters on balance have fared better than higher-end name brands.

The bankruptcy courts have welcomed storied soft-goods brands like Dallas-based Neiman Marcus, Lord & Taylor and Brooks Brothers, which have announced plans to move forward post bankruptcy with a lighter balance sheet.

Stein Mart awaits a similar fate as perennially challenged Pier 1, which in May also announced plans to seek Chapter 11 protection and said it was planning an “orderly wind-down” of its business including “store closing efforts and liquidation sales.”

Meanwhile, in a July 29 conference call with analysts to discuss its fiscal 2021 second-quarter financials, rival discounter At Home Group Inc. reported a 40% jump in same-store sales, a key retail metric, and total sales of $515 million, up 50%.

big number

281: The company operates 281 stores across 30 states. It employed about 9,000 people as of Feb. 1, but closed its stores in March and furloughed “a significant number” of those employees as the pandemic gripped the world, according to Bloomberg.

key background

The coronavirus pandemic convinced thousands of shoppers that it’s ok to buy throw pillows and knick knacks online, as evidenced by the huge sales jump seen by online furniture seller Wayfair Inc., which this month reported a profit for the first time since going public in 2014, breaking a string of losses, according to the Wall Street Journal. The company posted a $274 million profit on an 84% jump in sales to $4.3 billion. In recent years, Stein Mart retooled its website and launched a “buy online, pick up in store” initiative which it hoped would lure online shoppers, drive store traffic and “deliver incremental sales.”  In January, Stein Mart announced merger plans with investment firm Kingswood Capital Management, L.P.  In April, shortly after coronavirus began sweeping across the U.S., both sides announced plans to scrap the deal due to the uncertainty of the pandemic.

CRUCIAL QUOTE

Dr. Gautham Vadakkepatt, director of the Retail Center at George Mason University’s School of Business, said when the Stein Mart merger fell apart, bankruptcy began to look inevitable, adding “even before Covid-19, the company was struggling with a business model that was not resonating with customers, poor brand recognition and customer loyalty, relatively high levels of debt, and failure of the company to develop a meaningful digital presence/channel. Covid-19, and the accompanying drying up of cash flow only accelerated the demise of this company. I personally think this trend will increase in the future, separating winners from losers based on customer loyalty and brand recognition.”

tangent

Brooks Brothers, America’s oldest apparel company, said this week that SPARC Group LLC — widely reported as being mall owner Simon Property Group and brand-licensing firm Authentic Brands Group — has emerged as the winning bidders in its bankruptcy, after the two increased their offer to $325 million for the “vast majority of the company’s global business operations as a going concern as well as its intellectual property portfolio.” Authentic Brands has rescued name plates like Barneys New York, and Simon has a vested interest in keeping brands alive to fill its mall space. The new owners have committed to continue operating at least 125 Brooks Brothers retail locations.

further reading

Stein Mart files for bankruptcy (Seeking Alpha)

Stein Mart files for bankruptcy with plans to possibly close all its stores (Dallas Morning News)

Brooks Brothers to be sold for $325 million to mall owner Simon and Authentic Brands (CNBC)

Brooks Brothers Survived Civil War But Heads To Bankruptcy Court Amid Coronavirus Lockdowns (Forbes)

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