The Covid pandemic hit malls hard. Even when they were allowed to operate, many people did not want to be confined in a tight space with other people breathing near them.
Mask rules and social distancing requirements made the once-fun experience of just wandering around a mall a whole lot less fun. Even when vaccines were introduced and life returned mostly to normal, some malls — generally the weaker ones before Covid — continued to struggle.
Related: Beloved discount retailer faces significant bankruptcy risk
So far, no major mall-based retailer has filed for a post-Covid bankruptcy. Bed Bath & Beyond, Christmas Tree Shops, and Tuesday Morning, all of which went bankrupt and were liquidated, generally were located in strip malls. The same is true for Party City and David's Bridal, two chains that managed to survive their Chapter 11 filings.
But, mall retailers are not immune from the problems caused by Covid, where sales dropped to near zero for months, but expenses did not go away. That led to increased debt.
The pandemic also changed consumption habits. Some people still work from home full time and many Americans are now in hybrid work situations. That has changed their wardrobe needs and that's bad news for certain retailers, including Express, a mall favorite with over 500 stores nationwide.
"Express is truly on a respirator and teetering on possible bankruptcy,” Shawn Grain Carter, a retail consultant and Fashion Institute of Technology professor, told RetailDive.
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Express is struggling in many ways
Express has seen its sales fall and its cost rise,
The retailer’s consolidated net sales dropped 6.4% to $435.3 million, according to its second-quarter earnings report. In addition, the company’s selling, general, and administrative expenses have increased to $146.1 million (33.6% of net sales) compared to the second quarter in 2022.
Perhaps most damningly, the chain's debt has consistently grown. In fact, its total debt was $220.8 million at the end of Q2 2023, compared to $202.2 million at the end of Q2 2022 and $122 million at the end of Q4 2022.
"Over the last few months, speculation has been mounting about apparel retailer Express’ financial state. While some might speculate that one big thing has caused the retailer’s failure, that’s just not how bankruptcies work. Several things have been going wrong over a prolonged period," Matthew Debbage, Creditsafe CEO of the Americas and Asia, told TheStreet via email.
According to Creditsafe data, 35% of the company’s owed payments are past due, which amounts to over $3 million.
"On top of this, Creditsafe data reveals that the value of these late payments is well over $3 million. While this might not seem like a big chunk of money compared to Express’ annual revenue, the fact that the retailer’s DBT (Days Beyond Terms) has increased consistently for the last six months indicates that its cash reserves are likely low, which will only drop even lower if sales continue to decline, operating costs keep rising and its debt load grows," he said.
It's a slowly rising tide that could ultimately swallow the company.
"When you combine all these factors, I can see why some analysts are speculating that the company could be at high risk of bankruptcy," he wrote.
Debbage believes the company should be taking steps to prepare for a Chapter 11 filing (even if it ends up not needing one).
"What Express needs to be thinking about right now is how it can cut operating expenses with a recession looming and consumer spending expected to drop significantly," he wrote. "The retailer’s finance leadership should also be prioritizing data, analytics and technology to make sure it has the right financial data so it can get a clear picture of its financial affairs, especially if it tries to secure financing to stave off bankruptcy."
Express did not return an immediate request for comment sent to its investor relations email.
