This could be the next big retailer facing bankruptcy

That is why Customized Brands (TLRD), which has the Men’s Wearhouse brand, Jos. Banks and K&G, could become the next major American retailers to file for bankruptcy.

“The company has had bankruptcy advisers for several months now. The company is exploring all the options and not 100% they are proposing, but the chances are quite high,” said Reshmi Basu, a retail bankruptcy expert and analyst with Debtwire, which tracks companies the depressed. “There won’t be many requests given the work from home environment.”

A number of national retailers have filed for bankruptcy during the pandemic, including J. Crew, Neiman Marcus and JCPenney. The retail clothing sector has been devastated by the crisis because consumer demand for new clothing has fallen sharply. The gap (GPS) reported a record loss of $ 932 million for the first quarter.

Other companies that face bankruptcy risks include Ascena Retail Group (ASNA), owner of the Lane Bryant clothing chain, Justice, Ann Taylor and Dress Barn, who recently warned there were “substantial doubts” about his ability to stay in business.

The Customized Brand revealed it was at risk of bankruptcy or even shutting down operations due to the Covid-19 crisis in its filing late Wednesday.

“If the effects of the Covid-19 pandemic drag on and we cannot increase liquidity and / or effectively address our debt position, we may be forced to reduce or stop operations and / or seek protection under applicable bankruptcy laws,” the filing the word. The company said it had no comment outside the filing.

The company deferred rental payments for April and May when most of the locations were closed. It is said to have been able to negotiate the suspension of leases for a large number of its shops, with payment at a later date, starting in late 2020 until 2021. It was also on leave or layoffs of 95% of its 19,000 employees.

But things are not going well in 44% of the Customized Brand stores that reopened in early May. For the week ending June 5, sales at locations opened for at least one week fell 65% at Men’s Wearhouse and down 78% at Jos A. Bank and 40% at K&G.

Sales fell 60% in the fiscal first quarter, which ended May 2. All stores were closed for about half a quarter, and online operations were stopped for two weeks in March. But Tailored Brands has delayed reporting its full results – the Securities and Exchange Commission allows companies to defer reporting during the pandemic.

One reason for this delay is because it considers how much it costs to write down the values ​​of various assets, including the good intentions they carry on their books – a measure of brand value and company reputation. The accusation will be purely an accounting step that does not involve cash, but can increase the cost of borrowing money the company needs to get through a crisis.

The Adjusted Brand had $ 201 million in unrestricted cash on June 5, but that was mainly because it attracted $ 310 million in existing credit lines during the first quarter. All that remains is with only $ 89 million available under the line.

The company has around 1,400 stores in the United States and Canada, with about half of which are named Men’s Wearhouse. It may have to cover a significant percentage of them no matter what happens with reorganization efforts, Basu said.

“This is a company that has the feet needed to turn things around,” he said. “But consumer tastes and demands will change. They will emerge from bankruptcy with a much smaller footprint.”