The renowned women’s clothing retailer based in New York, Cache Inc. (CACH, Financial), has been facing tough competition from online marketers and this “brick and mortar” retailer has recently joined the league of retailers who have filed bankruptcy under Chapter 11. In the last quarter report which was released in November the specialty retailer’s management had emphasised that as the losses were increasing at an alarming rate, it was in search of a strategic partner for a possible merger or sale to make a turnaround. On last Wednesday, February 4, when the retailer declared the bankruptcy news, it stated that during the holiday season the sales did witness a positive push and revenue at its established stores rose nearly 10%. But the slight push forward immediately faced the onslaught from online shoppers, change in consumer tastes and the depression building up in the brick and mortar retail segment. Let’s find out what facts have been shared by the management regarding the bankruptcy filing. Here’s the total story.
The bankruptcy proceeding likely to take shape
As Cache joins the list of retailers who have filed for bankruptcy in the past few months, the management still remains optimistic that such a step will aid in bringing the company back into shape. Expectations are riding high that such a planned step taken by the company would aid in surviving against the tough battle being faced from the whopping growth witnessed in the online shopping retail segment as buyers seem least interested in the “touch and feel” concept available through the conventional stores and are happy buying online.
The immediate question which comes up when we refer to bankruptcy under Chapter 11 is that what could be its implications. In fact, such a filing offers protection to distressed companies against lawsuits of creditors while it puts all efforts to reorganise its balance sheet by spending more time on its financial playbook. CEO and Chairman Jay Margolis stated last Wednesday, while announcing the bankruptcy filing, “We believe that this action provides (Cache) the greatest opportunity to secure a strategic partner while maximizing recovery to our stakeholders…”
The company has emphasized that it has plans to seek a potential buyer of its valuable assets, meaning it would invite competitive bids and set a floor of auction for selling off its assets to a potential buyer. However, the retailer would not be closing its operations completely and would continue with its business. But the focus on closing down stores at unprofitable locations was still in place and it was also looking forward to selling off or on renegotiating some of its existing leases to generate cash for the company presently facing a terrible cash-crunch.
During the bankruptcy proceedings the stock would get delisted from the Nasdaq exchange and thus most of its investors have already initiated a sell off of their investment as news of Chapter 11 filing came into sight. Meanwhile, the company is hopeful of securing capital of around $22 million from Salus Capital Partners for debtor-in-possession financing in order to keep its existing operations active during the bankruptcy proceedings. This financing is however subject to court approval.
Final note
In the past three months, this is possibly the fifth time a conventional retailer has jumped off the track and has filed for bankruptcy. With the consumer spending style seeing a rapid change, such filings do reflect the plight being faced by conventional retailers struggling to pull up the sales at their retail outlets. With the Chapter 11 filing, time will only ascertain to what extent it aids in the complete turnaround of the U.S. apparel retailer Cache that has not reported any profits for the past nine quarters in a row. Let’s stay tuned and keep an eye on the latest news with regard to Cache’s upcoming future.
