Filene’s Basement is officially on the block, but the move by parent Retail Ventures Inc. might not be enough to stave off a bankruptcy filing by the off-pricer.
This story first appeared in the April 20, 2009 issue of WWD. Subscribe Today.
Retail Ventures said in a regulatory filing with the Securities and Exchange Commission late Thursday that it would classify the business as “held for sale” in its annual statements. The filing also said that due to the reclassification of Filene’s, the group would need additional time to close its books for the year, and that it would file its annual report no later than May 1. Retail Ventures also owns the DSW shoe chain. It spun off an 81 percent share of Value City Department Stores in January 2008, and that business was later liquidated.
Filene’s Basement closed 11 stores in January and began renegotiating leases for its remaining 25 stores.
“The performance of Filene’s Basement has continued to deteriorate significantly since that time, and [Retail Ventures] has concluded that renegotiation of the remaining leases is not likely to lead to sustainable operations for Filene’s Basement,” said the company.
Retail Ventures said it will continue to pursue alternatives to address its own challenges as a result of the liquidity issues at its Filene’s unit.
“For 100 years shoppers have been able to turn to Filene’s Basement in good and bad economic times and find designer labels at prices they could afford,” said a spokeswoman for the store. “Filene’s Basement, like so many retailers, has been hurt by the current economic climate. As we stated a few weeks ago, all strategic alternatives are being pursued to deal with the current economic realities and this most recent filing is consistent with that.”
Financial sources said the off-pricer, known for its annual bridal gown sale, hasn’t been paying its bills or getting shipments from vendors for some time, and legal sources said at the end of last month that the retailer wasn’t even returning vendors’ phone calls.
Those issues led to the formation of an ad hoc creditors committee. While communications between vendors and the retailer have resumed to some degree, credit sources have expected a bankruptcy filing for the last two weeks. Should Filene’s file, neither Retail Ventures nor DSW is expected to be parties to the filing, although Retail Ventures is on the hook as guarantor on certain obligations under a loan agreement between Filene’s and its bankers.
One credit analyst said Friday that, whether in or out of a bankruptcy proceeding, a potential buyer would most likely cherry-pick the more profitable sites.
“I think they will file anyway….I can’t think of anyone who would want to buy the entire chain. That’s a reflection of how bad it is out there, and the name plate as well. This company hasn’t done well in awhile,” he said.
Filene’s Basement opened in 1909 and became part of Federated Department Stores Inc., now Macy’s Inc., in 1929. It was sold to May Department Stores Co. in 1988, and then was acquired in 2000 by Value City Department Stores LLC, which later became Retail Ventures.