Express Inc. appears to be running out of options.
Troubles at the apparel retailer haven’t eased, and it appears that the company is still awaiting a $52 million tax refund owed to it by the U.S. government in connection with the CARES Act. Express CEO Stewart Glendinning noted in an internal memo on Feb. 14 that the payment has two installments. One is for $43 million from the IRS, and the second at $9 million is still under review.
Adding to its problems, some lenders are getting antsy. There has been talk that the retailer was asked to set aside some cash reserves because of the concern over a bankruptcy filing. That filing could come later this month. Bloomberg first reported on Tuesday that the filing could occur as early as next week. The report also said the retailer is exploring financing options to help with a Chapter 11 filing.
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Sourcing Journal reported in February that the retailer was in talks with lenders about restructuring options. A follow-up story one month later noted that the company’s cash crunch meant it had to delay payments to vendors as it tried to preserve its liquidity.
But according to credit monitoring firm Creditsafe, late payments have been a consistent problem at Express. And its debt load totaled $274.7 million at the end of the third fiscal quarter of 2023, which includes a $65 million loan taken out last year at a 15 percent interest rate, according to Ragini Bhalla, Creditsafe’s spokesperson and head of brand. She also forecaste at the time that if Express fails to get its payment from the IRS, it would be “hard for the retailer to continue operations for much longer.”
Currently, there’s no expectation that 2024 will result in a higher rate of fashion bankruptcies when compared with 2023 levels. But the thinking is that retailers who are financially distressed and on the hunt for financing could feel more pressure after finding out that lenders have tightened up their lending criteria.
That’s appears to be the position that Express is in right now, particularly since its finances appear unstable.
According to Bhalla, the number of delinquent payments at 91-plus days jumped from 0.03 percent in January 2024 to 0.22 percent in February 2024, a signal that cash flow remains tight. Another measure Creditsafe reviews is the “Days Beyond Term,” or DBT, the average number of days when a business pays its bills beyond an invoice’s contractual due date.
In March 2023, Express’ DBT was 1, but spiked up to 11 in August. The DBT is calculated using 30 days as the base, which means that in August, Express was paying on average 41 days after the invoice due date. The company’s DBT dropped to 9 in January 2024, but then nearly doubled to 15 in February 2024, Bhalla said.
“While its DBT isn’t necessarily that high, it’s more worrying that it hasn’t been stable and has spiked in short periods of time,” Bhalla said. “This signals instability in the company’s finances, which is probably being amplified by the pressures of its mounting debt and revenue declines.”
Express launched its Expressway Forward Strategy in 2020 as the retailer sought to rejigger sales and consumer interest coming out of the COVID pandemic. At first, it seemed that customers were responding to its updated product assortment, which included a new denim collection. The retailer also leaned into social selling, as well as a move off the mall to local stores catering to community needs. But as young professionals head back to the office, the retailer found that the new hybrid model meant they no longer needed office attire for the full work week. Moreover, Express faced increased competition from ultra fast fashion firms, such as Temu and Shein.
The Express umbrella includes its core Express business, as well as UpWest and Bonobos. The retailer also inked a licensing deal valued at $400 million with brand management firm WHP Global, with WHP acquiring the intellectual property assets from Express. There’s been talk in the fashion market that WHP could come in and make a bigger investment stake. While that could help to forestall a bankruptcy filing, it remains unclear what other advantage it would give Express, particularly if the retailer can’t seem to find a way to get its assortment mix to resonate with consumers.
Executives at Express did not respond to a request for comment.
