What’s Next for Post-Bankruptcy David’s Bridal
David’s Bridal is moving forward with expansion plans after Cion Investment Corp. plucked the wedding and special occasion retailer from Chapter 11 bankruptcy.
“We are dream makers and we make dreams happen,” Jim Marcum, David’s Bridal’s CEO, wrote on the company website, telling customers that “David’s is here to stay.”
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Marcum reassured shoppers that David’s Bridal was fulfilling orders during the bankruptcy. “A promise is a promise, and we keep our promises,” he wrote.
“We are working to expand our presence beyond our stores with our online marketplace, Pearl by David’s; pop-ups; and shops in shops in partnership with other retailers,” he continued, adding that the retailer is using data-driven insights to “reimagine our role as a nation’s leading bridal and special occasion authority.”
The global wedding dress market is expected to pass $73 billion by the end of the decade, up from about $44 billion last year, according to Zion Market Research published last month.
David’s Bridal leadership now faces the daunting task of avoiding becoming a rare Chapter 33 victim. That’s the term for companies like now-defunct Filene’s Basement that file for Chapter 11 bankruptcy three times. David’s Bridal is already on its second brush with bankruptcy after filing in April.
The retailer had been in trouble for some time. Its original bankruptcy came in November 2018 and wrapped up two months later. Though it cut $450 million from its $1.05 billion debt, some were concerned that it didn’t fix its operational problems. At the time, BDO restructuring expert David Berliner said blamed secured creditors and trade vendors worried about the costs of lengthy bankruptcy for the retailer’s quick exit.
The no-cash transaction by Cion, which was David’s Bridal’s secured lender, let the retailer cut debt from $256.9 million to just $50 million and avoid liquidating. The deal saves 7,000 jobs and anywhere from 92 to 195 stores. Cion has 90 days to decide if it will keep any of the remaining 105 store leases.
“We believe this transaction to substantially reduce the company’s debt burden and store portfolio will enhance the company’s ability to benefit from the expected post-COVID rebound in wedding activity and position the company for future success,” said Gregg Bresner, president and chief investment officer of the New York City-based business development firm.
The financial restructuring might fix its balance sheet, but now David’s Bridal has to stay close to what fickle consumers want.
Marcum, who was named CEO in June 2019, came to David’s Bridal after C-suite stints with Stage Stores, Marshalls, Circuit City and Hollywood Entertainment.
David’s Bridal has a few different problems on its hands. One of the biggest is that weddings have been getting more casual, an issue Marcum brought up in bankruptcy court documents. Then inflation led to bloated inventory and higher overhead, not to mention a cash-flow crunch and debt obligations that forced the chain to start looking at its options last fall.
Consumers in the U.S. seem to be in solid shape at the moment. The Consumer Confidence Index rose this month to 117.0, up from 110.1 in June, for the second straight month of gains, the Conference Board reported Tuesday, suggesting people feel good about their job prospects and how the economy is doing. And they also have a positive near-term outlook. At 88.3, the six-month expectations component signals that consumers aren’t worried about a recession taking hold in the next year.
David’s Bridal is trying to cater to shopper preferences. In March it rolled out a line of gowns made with recycled fabrics. Last year it purchased Anomalie, a startup brides use to design their dresses online. Though David’s Bridal offers an inclusive assortment with sizes 0-30W, a spot check indicates that 28W and 30W are most often out of stock. It could be facing stiffer competition for plus-size customers after Eloquii launched a line for 14W-28W brides last year.
Cion will provide $20 million in new funding to David’s Bridal to fund future growth, and will take over some of the retailer’s bankruptcy-related risks. Bank of America will continue to provide financing through a $50 million revolving credit facility and a $20 million term loan facility.
