Body Central Corp. on Wednesday said it “is experiencing significant liquidity challenges” that could force the struggling fashion retailer to file for a Chapter 11 bankruptcy reorganization.
The Jacksonville-based company also said it received a notice of default from a group of investors who last spring invested $18 million in notes that could be converted into common stock.
Body Central has been struggling with sharply declining sales for more than two years and has reported six consecutive quarterly net losses. It has outlined plans to turn around its sales trends, but has so far been unsuccessful.
“While the Company has made significant reductions in expenses and reduced excess inventory levels, our top line remains challenged by both the overall market environment and the transition time required to complete the merchandise transformation that began in the latter half of 2014,” President and CEO Ben Rosenfeld said in a news release Wednesday.
“The management team and board, along with its advisors, will continue to evaluate all available alternatives that may be appropriate for the business,” he said.
Rosenfeld was brought in as CEO in November, succeeding Brian Woolf, who had only been on the job for 20 months.
Body Central said it is taking steps to identify potential alternatives that “may include and are not limited to the possibility of a Chapter 11 bankruptcy filing or an insolvency proceeding.”
The company said it has no timetable for completing the process.
Body Central currently has 265 stores in 28 states but after closing 28 stores last year, it has planned to close an additional 50 this year.
Body Central stores are targeted to teenage and young adult women.
The company posted an investor presentation on its website last month saying it was focusing on redefining its image as a “sexy brand,” with an emphasis on “nightlife” product.
Investors have been wary of the company.
Body Central was the worst-performing stock among Jacksonville-based companies last year, dropping 97 percent after a 61 percent fall in 2013.
The stock plunged again Wednesday after the midday announcement, dropping from about $1 in morning trading on the OTC Pink Sheets to as low as 25 cents.
The company did get an infusion of cash last June when a group of 13 investors bought the $18 million in convertible notes. The investors also got a say in running the company with three representatives from the group named to the board of
directors.
The note holders sent a letter to Body Central on Tuesday saying the company has failed to make payments due on the notes, putting it in default.
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