hristopher & Banks was founded in 1956, but based on numbers from its most recent 10-Q the firm might not be around much longer. The Minnesota-based company sells clothing to female baby boomers at 448 stores in 44 states across the U.S. Christopher & Banks was already in the midst of an attempted turnaround when it was forced to close its stores on March 19 due to the pandemic. Although 400 stores were re-opened by June 12, significant damage had been done.
The cash balanced dropped from $3.2 million to $183 thousand in just three months.
Yes, that’s right. $183 thousand.
This company’s in trouble. The $10 million it received from the PPP (Paycheck Protection Program) kept Christopher & Banks afloat, but the company must do everything it can to cut costs. So far, it has:
- Reduced corporate salaries by 20 to 50%
- Suspended most capital expenditures
- Canceled inventory orders for spring and summer
- Asked its suppliers for more time to pay
- Stopped paying rent
The good news is that one-third of the company’s store leases expire in 2020, so Christopher & Banks can (1) close unprofitable stores without having to pay a lease termination fee and (2) negotiate more favorable lease terms on stores it plans to keep. Christopher & Banks hired a real estate consulting firm to help with the lease structuring, which just goes to show that yes, there really are consulting firms for everything.
Christopher & Banks also hired a different consulting firm to help with cost reductions, so some of the corporate staff could be fired. And maybe they should be fired, since the company’s e-commerce sales actually decreased by 10% during the quarter. I’m assuming this means that most of their online sales were of the “pick up at store” variety, but in any case a decrease in online sales during a time when people were stuck inside their homes is shameful.
If you’re tempted to attribute all the company’s problems to COVID-19, bear in mind that Christopher & Banks had negative cash flow from operating activities not just in the first quarter of 2020 but also in the same quarter the year before.
Thus, it’s difficult to see a path forward for Christopher & Banks. The constant cash burn means the company will go bankrupt in the next year or two unless it’s able to borrow more. If its credit dries up, Christopher & Banks is done.
Here’s a link to the company’s 10-Q in case you’d like to review the carnage: