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Eddie Bauer (EBHI)
Eddie Bauer Files for Bankruptcy for the Second Time
In this economy, we are well aware that many retail stores are facing intense hurdles, working hard just to keep their business afloat. Some companies have managed to surprise us, while others have folded under the pressure. Unfortunately for Eddie Bauer, they are one company that was not able to make it through unscathed; the company announced yesterday that they were filing for Chapter 11 bankruptcy. Chapter 11 bankruptcy, however, does not mean the end of the trail for this outdoor clothing chain; the company still has options, and hope for recovery. The company has overcome obstacles in the past - but can they do it again?
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| Stock Analysis |
The company announced yesterday that they were filing for Chapter 11 bankruptcy, due to a "crushing debt burden." A number of other retail stores have already been forced to take similar action, notably including Circuit City and Linens 'N Things. And as with many other retail stores, Eddie Bauer has not been turning a profit recently, posting a loss of $44.5 million in the most recent quarter. The company announced that as of yesterday, they held $476.1 million in assets, and $426.7 million in debt.
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Eddie Bauer's recent struggles, while partially influenced by the economy, are also being affected by the company's history. The company has been around since 1920, and originally focused heavily on outdoor clothing and sporting equipment. The company was purchased by Spiegel Inc. in 1988, which brought about two fundamental problems: they attempted to change the image of Eddie Bauer into more of a casual clothing store with an increased focus on women, a strategy which did not work, and also Eddie Bauer became loaded with debt as Spiegel racked up debt from a number of acquisitions. Eddie Bauer was forced into bankruptcy from 2003 to 2005, and after coming out of bankruptcy they were still left with about $300 million in debt. CEO Neil Fiske summarized the unfortunate situation yesterday, saying "Eddie Bauer is a good company with a great brand and a bad balance sheet."
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But luckily for Eddie Bauer, they are being given another chance. CCMP Capital Advisors LLC has already put a bid out for the company, offering $202 million. If the deal goes through, the firm has seemed to indicate that they will keep many of the current store locations open for business, and retain most of the employees as well. CCMP had previously thought about purchasing Eddie Bauer when they were going through their first bankruptcy, but was wary of the company's situation at the time.
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One of the selling points for Eddie Bauer appears to be that CEO Fiske and the company had already begun to develop plans to turn the company's image around, and bring it back to a more outdoorsy store. The company is developing a new brand called First Ascent, which will include gear and apparel. CCMP has seemed to indicate that they feel Eddie Bauer is in a better position now, and they hope to elaborate on Eddie Bauer's plans to restructure and reformat the store. If CCMP's bid is accepted, the firm seems optimistic that they can make some positive changes for Eddie Bauer, and hopefully the company will come out of bankruptcy again, this time much stronger than before.
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Profile |
Click here to view a detailed profile of Eddie Bauer.
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