Bakers Footwear Group, Inc. announced a broad series of actions designed to restructure its business for improved results, liquidity and long-term growth. The plan will streamline the company’s operations to focus solely on its Bakers brand through actions taken to optimize its store base and realign its design and merchandising operations. Proceeds generated from the exit of stores and reduction of costs will be used to reduce debt.
The plan includes a reduction of between 72 to 77 stores, which will be fully in place by year-end fiscal 2012 through the second quarter of 2013. The smaller store base is expected to result in:
Fiscal 2013 net sales of approximately $140 million with e-commerce sales representing 15% to 20% of this total;
141 to 146 Bakers stores, a decline from 218 today; and
Significantly improved operating results, with potential profitability on an annual basis from the smaller store base
Peter Edison, Chairman and Chief Executive Officer of Bakers Footwear Group commented: “We are pleased to announce this restructuring to refocus Bakers as a premier destination for moderate priced fashion forward footwear and accelerate our path to profitability and growth. We expect to generate significant short term cash and savings over the next 12 months which will enable us to reduce outstanding debt and improve cash flow. Upon completion of this plan we will operate a more productive chain of approximately 145 stores with a team that is passionate and focused on our Bakers brand and possess increased financial flexibility to execute our business plan.”
Elements of the plan include:
Selling leases and other assets for up to 52 store locations to Aldo U.S., Inc. for $6.4 million, subject to landlord consents. This transaction is expected to close in three phases from January 2013 through June 2013.
Closing 20-25 underperforming stores in fall 2012 in connection with natural lease expirations, agreements with landlords, or otherwise.
Liquidating inventory in connection with the Aldo transaction and other planned store closings is expected to raise approximately $6 million to $8 million. These funds are in addition to the cash generated by the Aldo lease sales. The Company will use these proceeds to pay down its bank debt and trade creditors.
Generating up to $7 million in annual expense reductions once fully implemented through the reduction of the Company’s workforce and other selling, general and administrative expenses to reflect its smaller more focused enterprise.
Terminating its license for H by Halston, effective December 31, 2012, to reflect a smaller store base and allow the Company to focus on building its Bakers brand.
Restoring its Flagship Bakers brand as a leader in moderate price footwear with new leadership in buying and merchandising. The buying and merchandising departments will report directly to Chairman and CEO Peter Edison.
The Company expects to incur accounting charges throughout the plan, which have not yet been quantified, beginning in the second quarter of fiscal 2012.
The Company also announced that it is continuing to work with Crystal Financial, its senior lender on its revolving credit facility. Crystal consented to the Aldo transaction. In addition, although the Company is in default on its credit line, primarily relating to over-advances in excess of the contractual limit generally between $1 million and $1.5 million, Crystal has continued to fund the Company and has not taken collection action against it. The Company is in negotiations to secure a forbearance agreement with Crystal and, ultimately, an amendment and waiver agreement to return it to compliance.
