(ATLANTA BUSINESS CHRONICLE) -- Overwhelmed by debt payments and a steep drop in customer spending, Eddie Bauer filed Wednesday for bankruptcy protection, becoming another high-profile corporate casualty of the recession.
Eddie Bauer had struggled with its debt - a crisis that worsened as revenue dropped, part of an overall trend affecting most retailers during the recession. The company has lost nearly a half billion dollars in the past three years.
*Click here to see a copy of the bankruptcy filing.
Those losses, coupled with the impact of the recession and debt payments apparently pushed the company into bankruptcy court - a move that was rumored for months.
Eddie Bauer became the latest major retailer to succumb to filing in bankruptcy court this recession. The list also includes Linens 'n Things and Circuit City.
In many ways, Eddie Bauer's crisis is not different from what most retailers are facing during this prolonged and deep recession, said Greg Charleston, an Atlanta-based consultant for Conway MacKenzie who works with financially stressed retailers looking to restructure.
Most retailers - except discount stores like Wal-Mart - have seen a fast drop-off in retail revenue across the board, Charleston said. Many of the specialty retail department stores have seen double-digit same-store sales declines, he said.
"When revenue drops and same-store sales drop, companies with less debt can weather a downturn much longer," Charleston said. "It becomes an issue much sooner if you are into liquidity issues."
As of May 11, Eddie Bauer reported having $289.5 million in outstanding debt, including $187.8 million in term loans and $75 million in convertible notes, which company executives have been trying to persuade debt-holders to convert into shares of the company.
According to a filing with the Securities and Exchange Commission, Eddie Bauer had total assets of $525.22 million in April. The company listed total liabilities of $448.9 million.
Eddie Bauer reported net losses of $165.5 million in fiscal year 2008, part of a total of $478.7 million in losses during the past three fiscal years. In the first quarter that ended in April, the company reported net losses of 44.5 million.
For the first quarter of fiscal year 2009, which ended April 4, Eddie Bauer reported a loss of $44.5 million. That was a greater loss than the first quarter of 2008, when the company reported a $19.3 million loss.
Net sales for the first quarter of 2009 were $179.8 million, compared with net sales of $213.2 million in the first quarter of 2008.
The company said that combined comparable store sales - a barometer of success at the store level - fell 11.3 percent for the first quarter, a decline the company blamed on the recession and reduced retail spending.
Sales were down nearly 15 percent in Eddie Bauer's retail stores and sales through its direct channel were down nearly 11 percent. The outlet stores saw sales declined by nearly 76 percent.
"The first quarter was a difficult one, as the sharp downturn in the economy took its toll on our sales. We continued to focus on cost cutting and cash flow management, which helped mitigate the impact of lower sales," said CEO Neil Fiske, in a statement with the first-quarter results filed with the SEC.
It's unclear what impact bankruptcy might have on Eddie Bauer's 370 stores, including 251 retail stores and 119 outlet stores in the United States and Canada. Eddie Bauer has six stores in metro Atlanta.
Eddie Bauer announced in early April that it had amended its $225 million loan agreements with lenders.
Eddie Bauer also has been in talks with its lenders for months to convert $75 million in convertible notes into equity. The company has a July 1 deadline to convert that debt or face big penalties, something Eddie Bauer, which has depleted much of its cash and cash equivalences can ill afford to pay.
In May, The Wall Street Journal, citing unnamed sources, said Eddie Bauer hired Peter J. Solomon Co. as its investment banker to negotiate any sale.
(Atlanta Business Chronicle)