Tailored Brands may have to file for bankruptcy if the COVID-19 crisis continues, according to a filing with the SEC. The retailer posted a sales drop of 60.4% during Q1 2020, and unlike many other retailers that made up some of the difference with e-Commerce growth, its online sales, including rentals, fell 31.9%.
The retailer also reported a same-store sales increase of 2.4% in February. However, the pandemic forced Tailored Brands to close all its shops and e-Commerce fulfillment centers in the U.S. and Canada, from March 17, 2020 through the end of the first quarter. As a result of the uncertainty these closures created, Tailored Brands has requested a 45-day extension to file its Form 10-Q for the first quarter of fiscal 2020.
“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,” said Tailored Brands in the filing.
Tailored Brands is taking multiple steps to maintain its operations, including accessing $310 million of additional borrowing from its credit facility; aggressively reducing and deferring operating expenses, capital expenditures and inventory purchases; and seeking extended payment terms with its suppliers, vendors and landlords.
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The retailer also has implemented temporary base salary reductions ranging from 10% to 50% for officers and employees with a salary of $100,000 or more, and reduced the Board of Directors’ cash retainer fees by 50%. Additionally, most store employees, distribution network employees and corporate staff were furloughed or temporarily laid off.
Tailored Brands started reopening stores on May 7 and had 634 operational as of June 5. However, same-store sales performance at reopened stores was slow during that week:
- Down about 65% at Men’s Wearhouse stores;
- Down about 78% at Jos. A. Bank stores; and
- Down about 40% at K&G stores.
Additionally, e-Commerce sales were down 32% quarter-to-date as of June 5.
Tailored Brands had $201.3 million in cash and cash equivalents as of June 5, excluding $93.5 million of restricted cash. The retailer also has sold one distribution center and one owned store for total net proceeds of $13.4 million, and will make further efforts to manage its liquidity as stores reopen.
“The casualization, e-Commerce and digital marketing trends we identified in our business have accelerated due to the COVID-19 pandemic and we are pleased to have already made progress transforming our business to address these trends,” said Dinesh Lath, President and CEO of Tailored Brands in a statement. “While it’s still early and the operating environment remains highly uncertain, we anticipate sales will rebuild gradually during the remainder of the year. We are planning the business conservatively and will continue to operate with discipline to preserve our liquidity as we navigate this uncertain environment.”
