The women’s specialty chain on Friday filed a voluntary Chapter 11 petition for bankruptcy court protection in Delaware, with a plan for an orderly winding down of its business operations.
Jill Dean, chief executive officer of Coldwater, told WWD, “We were not able to find a buyer or source of capital to provide adequate liquidity to fund our turnaround.”
She explained that the company was “not far enough along in its turnaround for people to get comfortable, especially after our third-quarter performance.”
In December, when the Sandpoint, Idaho-based firm posted third-quarter results, the net loss widened to $23.8 million, or 78 cents a diluted share, from a net loss of $20.5 million, or 67 cents, in the comparable year-ago period. Net sales fell 17.9 percent to $154.5 million from $188.1 million. The last time it posted a quarterly profit was the second quarter of 2010. The last time it posted full-year profits was in 2006. The company was expected to file fourth-quarter and full-year results around March 5, but never did.
The firm’s management team had been working on fine-tuning its fashion offerings, but hadn’t been able to get the response and traction needed from consumers to effect any momentum in its turnaround efforts.
According to Dean on Coldwater’s consumer base, “Our active file has been declining for years. Our retention rates are healthy, but we’ve been unable to attract new customers to the brand. That style is aging and it has been one of the primary problems with our ability to drive retail traffic.”
Over the next several weeks, Dean will work with her merchandising and inventory planning teams, as well as store associates, on the upcoming liquidation of Coldwater. Going-out-of-business sales are expected to start next month.
The company said the decision to liquidate was made to maximize value for its creditors. Existing equity stockholders are not expected to receive any recovery on their investments following the wind down of operations.
Gordon Brothers Retail Partners and Hilco Merchant Resources are the two liquidators selected to assist with the going-out-of-business sales, subject to bankruptcy court approval and better offers from other asset-disposition firms.
In addition, Dean said the company is in the early stages of identifying options regarding the sale of the company’s assets.
The company operates 334 retail stores, 31 factory outlet stores and seven day spa locations throughout the United States. Real estate sources said many of those sites are in good markets, and the company should be able to attract interested operators for those sites.
In addition, there has been increasing interest recently in intellectual property assets, with brand-management firms acquiring the IP to operate the nameplate as an online-only business. Dean declined to comment on whether any of those discussions are taking place. Industry sources have told WWD that there is interest in Coldwater Creek from select brand-management firms having the know-how to take a retail brand online.
James A. Bell, vice president, chief operating officer and chief financial officer, in a statement filed with the bankruptcy court, said in an effort to recapitalize their balance sheet, the company reached out to “more than 75 parties” and “invited strategic alternative proposals of any nature.”
According to his court statement, the economic downturn that began in 2007 also coincided with the time period from 2007 to 2011 when the retailer “experienced multiple management changes and strategic shifts that, when combined with the debtors’ unmet sales expectations, led to significant inventory buildup.”
The Chapter 11 petition filed with the Delaware bankruptcy court listed total assets as of Feb. 1 at $278.5 million and total liabilities at $361.3 million.
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