Eddie Bauer Goes Belly Up and Files Bankruptcy
Eddie Bauer has gone belly up and filed for bankruptcy protection. The good news is the brand already has a buyer lined up and will be up and running soon after bankruptcy.
A retailer going bankrupt in this times? That is hardly a surprise! The malls are dead and the general trend among consumer purchases is downwards. Those retailers that are carrying debt are in massive financial trouble. Since nearly all retail companies are carrying such debt, nearly all of them are in trouble. The bankruptcy filing of Eddie Bauer is hardly the first and definitely will not be the last among the big retail outfits.
Eddie Bauer was established in 1920. Following a traditional business model, it slowly grew until it was huge and well-known for selling outdoor gear under its own name. That all changed in 1988 when it was purchased by Spiegel. Spiegel changed the focus to women’s clothes. Based on such brilliant management decisions, it was hardly a surprise that Spiegel went into bankruptcy in 2003. Eddie Bauer was eventually spun off in 2007 to create its own mess.
Why is Eddie Bauer filing bankruptcy? The same reason as most companies. It has a massive debt burden that it can’t get out from under. Specifically, it faces the prospect of servicing nearly 200 million dollars in debt while losing money to the tune of $45 million a quarter. Even those of us that barely got through high school math can see these numbers don’t work out. Alas, the management of Eddie Bauer came to the same conclusion!
The good news is a vulture…err, investor stands by to snap up the remains of Bauer. CCMP Capital Advisors LLC is the group. They are going to swipe in a pick up the assets of the company and relaunch. The company says that it will endeavor to keep as many employees and stores open as possible.
Eddie Bauer presents a fairly basic profile of most retailers these days. Years of leveraging their assets has left them up to their eyeballs in debt. Now that the consumer market has dried up, they are posting losses and are unable to service that debt. When things get to hot, the result is a brutal financial situation that leads to only one place – the bankruptcy court. Expect many other retailers to join Eddie Bauer over the next few years.