Dive Brief:

• With its stores closed and liquidity constrained, Stage Stores sought new concessions on payment terms and existing orders from its vendors in a memo to its supplier network.
• In a memo last week, obtained by Retail Dive and previously reported on by Reuters, Stage Stores CEO Michael Glazer and Chief Merchandising Officer Thorsten Weber said that the vendor concessions would be necessary in negotiating new capital and avoiding Chapter 11 bankruptcy. The company did not immediately respond to a request for comment.
• In a securities filing last week, Stage Stores said it entered a forbearance agreement with Wells Fargo that, among other things, reduced its revolving loan commitments to $250,000,000 from $425,000,000, increased the outstanding loan balance by $2.4 million and nixed Stage's ability to get a seasonal increase in its revolver.

Dive Insight:

Stage Stores was already under financial stress before the COVID-19 pandemic hit. The company had been working on an ambitious plan to rapidly convert from primarily a department store retailer to an off-pricer. But its fourth-quarter sales fell short of projections, creating a liquidity crunch that sent the company scrambling to revise its plans, which some say were always too ambitious. 

As Glazer and Weber tell it, after a disappointing fourth quarter the retailer's lenders became "increasingly impatient with us and unwilling to finance our store conversions," they said in the memo. "Our lenders made it clear that they believed we needed to reduce our borrowings under the credit facility. This forced us to slow pay our merchandise vendors. In turn, the response from our merchandise vendors was to require faster payments." 

As Retail Dive previously reported, Stage Stores after announcing its holiday results moved quietly to lay off corporate staff and close stores, pared its footprint well below that of its initial plans and worked to convert all of its remaining department stores to the off-price Gordmans banner, which Stage picked up 2017.

In their memo, the executives referenced that the store chain would emerge with "up to 650" Gordmans stores, below the 700 originally planned. Sources have told Retail Dive that the go-forward footprint could be as low as 500, though the situation appears fluid as the company negotiates with potential financial partners.

Complicating all of this is a nationwide pandemic that has shut down much of the retail world, including Stage Stores. The company previously announced it would close all of its 738 stores and furlough its store workers and most of its corporate staff.

The disruption from COVID-19 has already broken plans and sent other retailers deeper into financial turmoil. Just last week, Stein Mart's acquisition by a private equity firm was called off, and Neiman Marcus and J.C. Penney each missed interest payments, raising the prospects of bankruptcy filings.

Stage executives say they are working to avoid a filing and hinted to their suppliers that they would be better off giving Stage concessions now, through extended payment terms, than they would if the company filed.