Stage Stores, which operates department store brands in predominantly rural areas and small and midsized markets, is preparing for a bankruptcy filing that could come as soon as next week, people familiar with the situation tell CNBC.
The people, who requested anonymity because the plans are not yet public, cautioned that the plans are not yet definite, and a filing could still be delayed or avoided. Representatives for Stage Stores didn't respond to multiple requests for comment.
The move would further underline how the coronavirus pandemic has hammered companies regardless of whether they cater to the wealthy or the working class. Bankruptcy for the Houston-based Stage Stores – which owns the Gordmans, Bealls and Goody's chains in states like Kansas, Mississippi and West Virginia – would be the latest in a string of retail bankruptcies this month. This week already, preppy apparel chain J.Crew and luxury retailer Neiman Marcus have filed for bankruptcy.
It would also put further pressure on the job market after a record 20.5 million positions were lost in April, helping to drive the unemployment rate up to 14.7%. Stage Stores employed roughly 13,600 full-time and part-time employees as of February 2019.
Stage Stores has about 700 department stores predominately in small towns and rural communities. They sell mostly brands like Adidas, Calvin Klein, Estee Lauder and Levi's. It also has a number of off-price stores selling brands at a cheaper price point in larger Midwestern markets.
In its last fiscal year, Stage Stores had a loss of $87 million off of $1.58 billion in net sales, as it was hampered by costs related to buying and distribution. As of November, it had $26 million in cash and cash equivalents on hand.
The company was founded as a family owned business in the 1920s. Over the years, it grew through acquisitions of regional department stores, buying up brands like C.R. Anthony Co., located in the South Central United States, and Uhlman's stores in Indiana, Ohio and Michigan.
It's also bought the brands or leases of bankrupt retailers, including Goody's in 2009 and off-price retailer Gordmans in 2017. The 2017 deal, which included at least 50 Gordmans leases and the opportunity for more, paved the way for Stage Stores to announce two years later plans to convert all of its department store brands to the Gordmans banner.
But time may be running short for regional department store owners like Stage Stores. They were already struggling to compete with the scale of giants like Macy's, which have greater clout to negotiate with brands and more resources to invest in e-commerce. Walmart, Target and Amazon have all further encroached on department stores' territory, as have a number of upstart digital brands.
As with Neiman Marcus and J.Crew, the coronavirus may serve as a fatal blow to Stage Stores, as stores close and consumers keep tighter watch on their finances during the pandemic.
Stage Stores disclosed in a regulatory filing last month that it had begun discussions with landlords, vendors and other business partners to reduce its lease and contract payments, as well as other concessions. It also said that it was "exploring financing opportunities to enhance liquidity."
"We cannot predict when we will be able to reopen our stores, and our ability to reopen will depend in part on the actions of a number of governmental bodies over which we have no control," the company wrote in the filing.
It added, "Moreover, once restrictions are lifted, it is unclear how quickly guests will return to our stores, which may be a function of continued concerns over safety and/or depressed consumer sentiment due to adverse economic conditions, including job losses."