These 3 popular retailers are now at high risk of bankruptcy as they struggle to recover from the covid pandemic shutdowns.
Sleep Number, Rent the Runway and Marley Spoon — find themselves right now with a 1 on the Frisk scale, which serves as a warning to vendors and lenders.
“Our proprietary Frisk score indicates a company’s level of financial stress, based on the probability of bankruptcy over a 12-month horizon.
It’s proven 96% accurate in predicting U.S. public company bankruptcy during this time horizon,” Credit Risk Monitor says on its website.
When a company reaches the lowest score on the Frisk scale, a 1, that means it has a 10% to 50% chance of filing for bankruptcy.
A low Frisk score can become a self-fulfilling prophecy because vendors and lenders might become wary of extending credit to a company with that rating.
That could make it hard for the retailer to buy inventory in order to generate cash, reports TheStreet.
Other companies edging close to that score are Peloton and Beyond Meat.
Peloton and alternative-meat producer Beyond Meat, have scored a 2 on the Frisk scale.
That rating means that those two companies have a 4-9.99% risk of a bankruptcy filing.
Peloton has suffered due to marketing missteps and faltering demand.
The company’s sales surged during the pandemic when gyms were closed and people were looking for ways to work out in their homes.
Once the world reopened, however, demand dried up, and the idea of spending $2,500 to buy an exercise bike that requires a monthly subscription to use became much less popular.
The company, however, had scaled up its operations, assuming demand would stay strong, which has not happened, reports TheStreet.
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Also Read: Grocery Store With 217 Locations Now Closes For Good
Other Economy News Today
Another mall clothing retailer is now at high risk of bankruptcy as it prepares for debt restructuring, The Wall Street Journal reports.
Apparel retailer Express Inc. is preparing for a possible debt restructuring that could include a bankruptcy filing “within weeks,” The Wall Street Journal reported Monday, citing sources familiar with the matter.
According to the report, Express has hired M3 Partners and law firm Kirkland & Ellis.
Both entities specialize in debt restructuring, reports Retail Dive.
The retailer is looking to avoid a Chapter 11 filing by restructuring its debt outside the bankruptcy process, the report said.
Express reported total debt of about $275 million at the end of the third quarter, an increase from $235.4 million a year before.
During the company’s last earnings call in November, recently appointed CEO Stewart Glendinning acknowledged the company made some missteps: Among other factors, there was a misalignment between its assortment and customer demand.
Express took a hit during the pandemic as its core offering — business casual — fell out of favor as work-from-home surged.
“Unfortunately, my previous assessment of Express’ fragile financial situation leading to a possible bankruptcy due to declining revenue, gross margin profits and ballooning debt of $280 million is a foregone conclusion,” Shawn Grain Carter, a retail industry consultant and professor at the Fashion Institute of Technology at the State University, said in an email to Retail Dive.
“With high-interest rates, the retail company must decide between the ‘lesser of two evils.’
Moreover, until they fix the waning consumer demand for their merchandise and elevate the brand and product mix, financial wizardry will not resolve their retail woes.”
And after the New York Stock Exchange warned of a potential delisting in late March, Express executed a 1-for-20 reverse stock split, which decreased outstanding shares to 3.7 million from 74.9 million.
That stock split enabled Express to regain listing compliance with the New York Stock Exchange.
Around the same time, Express said it planned to cut 150 jobs by the end of the third quarter.
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Also Read: A US Company Now Declares An Unexpected Bankruptcy
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