In a retail landscape forever altered by the COVID-19 pandemic, mall-based retailers have faced their share of upheavals. Among them, Express (EXPR), a familiar sight in shopping centers across the nation, now teeters on the edge of bankruptcy, a stark reflection of the shifting consumer habits and challenging economic conditions of recent years.
A Rocky Road for Retail
The pandemic didn’t just disrupt shopping habits temporarily; it shifted them permanently for many consumers. While malls saw a decrease in visitors needing apparel, they still attracted customers for smaller indulgences like gourmet pretzels and Cinnabons.
However, these treats weren’t enough to sustain the traditional mall traffic patterns. According to Placer.ai, “Malls experienced a rocky few years as pandemic-related restrictions and economic headwinds kept many shoppers at home, and visits to all mall types in 2021 were between 10.7% to 15.3% lower than in 2019.”
Popular mall retailer plans Chapter 11 bankruptcy, suitors emerge https://t.co/nbBfyqv4HR
— Centre Daily Times (@centredaily) April 22, 2024
Despite a notable recovery in 2022, where foot traffic was just 2.3% lower than pre-pandemic levels, the resurgence wasn’t enough for some retailers. Express, despite aggressive cost-cutting measures and strategic pivots in merchandising, has struggled to regain its footing.
Express’s Financial Struggles and Strategic Shifts
Since the onset of the pandemic, Express has been in a precarious position, battling not only the immediate impacts of lockdowns but also a highly promotional competitive landscape and a cautious consumer base.
The company’s CEO, Stewart Glendinning, noted in a recent earnings call that despite realizing “$30 million of cost savings, which drove a 4% reduction in SG&A,” the company still faced sales and profit challenges.
“Our third-quarter sales and diluted loss per share came in below the low end of our outlook ranges,” Glendinning admitted. He remained optimistic about certain improvements, such as better women’s sales and higher conversion rates, but acknowledged the ongoing struggle to improve overall sales results.
The Looming Shadow of Chapter 11
With these challenges in mind, Express has begun consulting with advisors on a potential Chapter 11 bankruptcy filing. This move is considered a restructuring effort to allow the company to continue operations while attempting to regain financial stability.
Bloomberg reports that WHP Global, part of a 2023 partnership and a shareholder in Express, alongside Sycamore Partners, a private equity firm, are potential suitors in the bankruptcy proceedings.
This development underscores the broader implications for the retail industry, particularly for those operating within the increasingly deserted American malls. Rapid Ratings has flagged Express as a high default risk, advising clients of the potential dangers and encouraging preemptive risk mitigation strategies.
Looking Ahead: The Future of Express and Mall Retail
The potential bankruptcy of Express highlights a critical juncture for the retail sector, particularly for mall-based businesses. As consumer habits continue to evolve and e-commerce claims a larger share of the retail pie, traditional stores must adapt swiftly or face extinction.
For Express, the next steps involve a delicate balance of innovation, strategic restructuring, and perhaps, a bit of luck as it navigates through its most turbulent period yet.
In this ever-changing retail environment, the fate of Express will serve as a bellwether for the viability of traditional mall retailing in the post-pandemic era. Whether through revitalization under new ownership or a reimagined business model, the legacy of Express may yet have chapters left to write.
