Lands’ End could be put out of business in the next 12 months if it’s unable to refinance its debt, it warned in a Securities and Exchange Commission filing last week.
The Wisconsin-based retailer said that management has determined that its $385 million term loan, which matures in April 2021, “raises substantial doubt about the company’s ability to continue as a going concern.” Lands’ End is working to refinance the debt, which could put to bed concerns about its ability to stay in business.
“Due to the company’s recent trends of profitable growth, management believes that it will be able to refinance the term loan facility on acceptable terms despite the challenging financial environment reflecting the COVID-19,” it wrote in the filing.
For the first quarter ended May 1, Lands’ End recorded a 17.3% dip in revenues to $217 million. It also logged a net loss of $20.6 million, or a loss of 64 cents per diluted share, versus the prior year period’s net loss of $6.8 million, or a 21 cent loss per share. The company was forced to shutter its fleet of 26 brick-and-mortar units from mid-March to the end of the quarter as COVID-19 led to the temporary closure of so-called “nonessential” retailers.
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In response to reduced demand caused by the COVID-19 pandemic, Lands’ End implemented a series of measures aimed at decreasing overall expenses. In late March, the retailer furloughed nearly all store workers, along with about 70% of its corporate workforce. Employees across the company saw tiered reductions in salary, with 20% cuts for senior management and a 50% reduction for CEO and president Jerome Griffith. Planned capital expenditures for the 2020 fiscal year were also slashed by about 50%.
In addition, Lands’ End increased capacity on its ABL facility by $25 million, bringing maximum borrowings to $200 million. The facility could mature as soon as January if the company cannot refinance its term loan debt.
In June, S&P Global Ratings lowered Lands’ End’s rating from “CCC” from “B-,“ citing challenges the retailer could face in refinancing its term loan debt. S&P noted that Lands’ End’s “ability to address the maturity at par depends upon favorable market and economic conditions, adding that it believes the company “may have insufficient time to absorb unforeseen negative developments and complete the refinancing at par.”
