BREAKING: Stage Stores cuts staff, closes dozens of stores
Stage Stores has laid off corporate staffers this week, according to two people familiar with the company’s operations as well as social media posts and message boards.
The exact number of employees let go is unclear, as the company did not announce the total layoffs to staff, but two sources said the number was more than 20, and potentially dozens. Many of those let go were allocators and buyers in the retailer’s merchandising operations. This week’s layoffs follow others from last week, according to the sources. Stage Stores did not immediately respond to requests for comment.
The department store chain, which is undergoing a rapid transformation to off-price via its Gordmans banner, is also planning to shutter stores. The company sent an email Monday marking 60 existing Gordmans stores for closure as well as 10 department stores that were slated to become Gordmans stores, according to a person who viewed the email. Those are on top of 40 stores the company marked for closure last fall.
Numerous local media have reported on individual Gordmans stores slated for closure, including locations in Illinois, North Dakota, Indiana, Nebraska, Missouri, Iowa, Colorado and Wisconsin. Three Gordmans stores in the Houston, Texas, area are also closing, according to multiple sources, including an employee of one of the stores. As of mid-January, the company operated a total of 158 Gordmans stores.
Stage Stores has staked its future on Gordmans. In the fall, the company announced accelerated plans to convert its entire store fleet to the Gordmans banner, which would have given it around 700 by the end of the year. (That figure does not account for the recently planned closures, which have not been announced publicly.)
The plan would have been bold for any retailer, but Stage Stores is crimped by tight finances after years of losses. Pulse Ratings, which downgraded the company earlier this year, described the pace of Gordmans conversions as “very ambitious” given Stage Stores’ available liquidity. The company previously estimated the conversions would require $30 million in capital spending.
In January, the company announced a modest holiday sales increase that fell well short of projections. Liquidity concerns followed, and Debtwire reported in late January that the company had brought on advisers. Among them was the law firm Kirkland & Ellis, which has represented major retailers in bankruptcy, including Toys R Us, Forever 21 and Pier 1, among others. That story was followed by a Wall Street Journal report that the company was mulling a possible bankruptcy as it looked to restructure its debt.
The Kirkland & Ellis hire has created concern for suppliers and those that help finance them. Specifically, it’s made it more difficult for Stage Stores vendors to obtain credit protection. “After Debtwire reported that Stage Stores had hired K&E, several investors that had been willing to sell put options to vendors no longer were willing to take the risk,” Vladimir Jelisavcic, manager of Cherokee Acquisition, a firm that helps match finance providers and vendors, told Retail Dive.
Lack of vendor credit could disrupt Stage Stores’ supply chain and further crimp its liquidity, if suppliers pullback on trade credit. According to three sources familiar with Stage’s supply chain, the retailer is late paying some vendors, by several months in certain cases.
Employees and suppliers are still uncertain whether a bankruptcy filing is coming or not. And, of course, a Chapter 11 could have any number of outcomes.
Executives have said that Stage’s future is in off-price and have based their plans on results showing that those Gordmans stores converted so far have out-performed department stores.
Stage Stores CEO Michael Glazer said at the time, “By acquiring Gordmans, we believe that we have an opportunity to benefit from its off-price competencies, deep connection with a youthful customer, and strong home and gifts businesses.”