Stage Stores Proceeds With Liquidation

With the company unable to find a buyer, Stage Store liquidation sales are underway. The liquidation includes the Gordmans, Bealls, Palais Royal, Peebles, Stage, and Goody’s banners.

The company could not secure a buyer after filing for Chapter 11 bankruptcy protection on May 10 and did not have the financing to reorganize the business. Although the chain had some success in a pre-bankruptcy initiative to shift operations to its Gordmans off-price banner, the company never gained sufficient traction under that strategy to sustain itself in the tumultuous 2020 marketplace.

As the company explained in a bankruptcy court filing:

“In late 2018 and early 2019, Stage Stores tested and began to implement a new business model in an effort to position the company for future success. More specifically, Stage Stores began to transition all of its stores from a specialty department store model operating under the Bealls, Palais Royal, Peebles, Stage, and Goody’s brands to an off-price business model under the Gordmans brand name. Based on the encouraging results of 82 store transitions completed before September 2019, Stage Stores believed that the off-price model would buffer the company against the general shift in consumer behavior away from brick-and-mortar retail and help alleviate liquidity challenges. While the debtors missed their fourth quarter holiday forecasts, the market nevertheless supported the changes: Stage Stores stock rose from lows of under a dollar in January 2019 to a high of $9.50 in early 2020, including a 13% jump after Stage Stores announced its plans.

But Stage Stores’ liquidity issues intensified in early 2020. The company sought third-party refinancing and sale options as it also negotiated with vendors and landlords for incremental relief. And then COVID-19 happened. In this new reality, absent a third-party investor or purchaser, Stage Stores did not have the liquidity to implement its plan and continue operations. To preserve liquidity, the debtors closed their stores and furloughed approximately 14,694 employees on March 27, 2020. The debtors did not make rent payments on the majority of their 734 leases from March through and including the petition date, resulting in approximately $31 million in past due rent. Many landlords sent the debtors notices of default and began to take other actions, including locking the debtors out of their stores, commencing (or threatening to commence) eviction proceedings, or resorting to other “self-help” remedies. Combined with zero revenue and uncertainty associated with consumer demand in the coming months, Stage Stores, like so many others, was in the middle of a perfect storm.”

Gordon Bros. and Hilco Merchant Resources noted earlier this summer that they had been tapped to conduct Stage going-out-of-business sales, which are now being conducted at all 720 of the retailer’s stores including Gordmans and all associated banners.