Struggling fashion retailer Stein Mart Inc. filed a petition for Chapter 11 bankruptcy Aug. 12 and said it plans to close “a significant portion, if not all” of its 281 stores in 30 states.
The company said it is continuing to operate the business for now but has launched a store closing and liquidation process. It did not give a timeline for when stores may close.
The bankruptcy filing came a day after Stein Mart laid off about half of the 340 employees in its Jacksonville headquarters office including President MaryAnne Morin. Stein Mart has a total of 7,950 employees, according to court documents.
“We announced this morning that we have filed a motion seeking court approval to begin an orderly wind down of our operations as soon as reasonably possible,” CEO Hunt Hawkins said in an emailed statement.
“In partnership with our financial and legal advisors, we engaged in a thorough analysis of all available alternatives before deciding on this course of action. Ultimately, due to the combination of a challenging retail environment and the impact of COVID-19, we and our advisors determined that we will wind down the business,” he said.
The pandemic forced the company to close all of its stores in March. It began reopening stores April 23 and had all stores back open by June 15.
“Following the reopening of the stores, revenues and store customer traffic was initially positive, but were substantially below pre-shutdown levels,” Stein Mart said in a bankruptcy court filing.
Sales got worse in July as a resurgence of COVID-19 cases affected key Stein Mart markets in Texas, Arizona and California, it said.
Stein Mart was founded in Mississippi more than a century ago by the grandfather of Chairman Jay Stein.
It was a one-store operation until Stein took over executive leadership in 1977 and began expanding the company into a national chain.
Stein moved the headquarters to Jacksonville in 1984, a year after the first Stein Mart store in Jacksonville opened.
He took the company public in 1992 but remained in control of the business. Stein’s family still controls 35.7% of the stock, according to the Chapter 11 petition.
Stein Mart’s stock has been trading below $1 since May 19 as the company’s finances sagged. The company said in its Aug. 12 news release that securities holders will likely receive no value for their interests in the bankruptcy process.
A court filing projected liquidation of Stein Mart assets could bring in proceeds of about $250 million, which would be enough to pay off secured creditors but no other creditors.
Stein Mart reported a net loss of $65.7 million for the first quarter ended May 2, resulting in the company having a negative shareholders equity on its balance sheet.
“The Company lacks sufficient liquidity to continue operating in the ordinary course of business,” Hawkins said in the news release.
Stein Mart had been struggling before the COVID-19 pandemic, reporting a net loss of $10.5 million for fiscal 2019.
“From 2016 through the present, the Company’s sales generally declined and the Company faced the difficult task of growing sales while significantly reducing expenses in a difficult retail environment,” Stein Mart said in a court filing.
It said apparel and accessories retailers like Stein Mart have been affected by declines in store traffic in recent years.
Apparel retailers such as Brooks Brothers, Lord & Taylor and Ascena (Ann Taylor) also have recently filed for bankruptcy, the filing said.
Stein Mart had been hoping an increase in online sales could point the company in a positive direction. As it filed for Chapter 11, Stein Mart said it is looking at a potential sale of its e-commerce business and related intellectual property.
Stein Mart filed its Chapter 11 petition in U.S. Bankruptcy Court for the Middle District of Florida, Jacksonville Division. The case was assigned to U.S. Bankruptcy Judge Jerry Funk.
Jacksonville attorney Gardner Davis of Foley & Lardner is the company’s lead attorney.