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Dive Brief:
- Phoenix Retail, a newly formed joint venture comprising mall owners Simon Property Group, Brookfield Properties, Centennial and brand equity and management firm WHP Global, received court approval on Friday of its stalking horse bid to acquire most of Express Inc.’s assets out of Chapter 11. Phoenix will pay about $174 million split between $136 million in cash consideration and $38 million of assumed liabilities.
- The consortium will operate all direct-to-consumer commerce in the U.S. for the Express and Bonobos brands. The deal, which is expected to close within a week, will also keep over 450 physical stores open and nearly 7,000 jobs intact, Phoenix Retail said in a statement. The majority (403) of those will be Express stores, while 49 Bonobos guideshops will also remain open.
- Express filed for bankruptcy in April with plans to close more than 100 stores and sell itself to the WHP-led consortium. At the time, the company said in court documents it owed its top five creditors nearly $70 million.
Dive Insight:
Express has been in business for over 40 years. But after decades of success, the company’s core offering — business casual apparel for everyone — began falling out of favor as mall foot traffic declined and style trends tilted more casual.
The new joint venture places Express — and it’s relatively recent Bonobos acquisition — in the hands of three large retail property landlords and owners: Simon, Brookfield and Centennial. Simon and Brookfield in 2020 bought J.C. Penney out of bankruptcy in a similar deal.
“[Friday’s] court approval and the formation of Phoenix marks a vital step in our mission to save Express Inc. and continue serving millions of customers who love the Express and Bonobos brands,” Yehuda Shmidman, chairman and CEO of WHP Global, said in a statement. “With the restructuring actions accomplished during the Chapter 11 process, we believe Express is now well-positioned for a powerful path forward, benefiting all stakeholders, including our valued vendor partners, licensees, landlords and dedicated team.”
Many retailers are looking to grow outside of traditional shopping malls. Asked if that’s an approach Phoenix might take with Express and Bonobos, a spokesperson for the entity said “our immediate focus is on the current store footprint, e-commerce and merchandising. In the future, we will however consider any stores that are relevant to service the needs of the customers.”
Experts have speculated in the past that mall landlords are likely interested in acquiring certain retailers in order to keep mall stores open.
WHP and Express entered a strategic partnership in January 2023. WHP took a 7.4% stake in Express and invested $235 million in a joint venture with the retailer. Including Express, WHP’s portfolio now has 12 brands, including Toys R Us.
“Express landed in bankruptcy because their fashion merchandise assortment no longer targeted their customers,” Shawn Grain Carter, a retail industry consultant and professor at the Fashion Institute of Technology at the State University of New York, said in emailed comments to Retail Dive. “Consequently, they lost market share, brand equity, and share of wallet to their competitors such as Abercrombie and Fitch which is successfully eroding Express' market share dominance and gaining traction and brand loyalty among Gen Z and Millennials simultaneously.”
Eric Beder, CEO of Small Cap Consumer Research, told Retail Dive in an email that issues contributing to Express’ bankruptcy included stores that were too big and required too much rent “because they were dual gender and management wanted to offer fashion at an affordable price with higher quality which is a formula for failure in an era of fast fashion competitors.”
More recently, Beder said Express struggled to recover from pandemic-era inventory and fashion issues that affected the holiday 2022 season and continued into 2023. “Hopefully they have negotiated lower rents in bankruptcy to give the company a chance to survive and be profitable… there is a niche for Express, but the product and the returns have to reflect the pricing and their customer’s desire for fashionable looks at lower prices,” Beder said.
WHP announced late last year that it was growing its presence in Central America and Mexico and expanding into Indonesia and Paraguay. Those initiatives will continue with the new ownership, a Phoenix spokesperson said.
via https://www.aiupnow.com
Nate Delesline III, Khareem Sudlow
