(Bloomberg)—David’s Bridal Inc., No. 558 in the Internet Retailer 2019 Top 1000, reached a debt deal that would head off a second trip to bankruptcy court, according to people with knowledge of the matter.
The wedding-gown merchant held talks with lenders and equity holders from its previous bankruptcy including Oaktree Capital Group, said the people, who asked not to be identified because the talks are private. Certain stakeholders signed an agreement that reworks about $280 million of debt and injects $55 million of new money to keep David’s Bridal in business, the people said. That would leave about $75 million of debt outstanding.
“A move like this eliminates a ton of question marks and gives us the ability to focus on the future,” CEO James Marcum said in an interview. The company sells about 25% of all bridal dresses in the U.S., Marcum said, and about 92% of those brides choose to shop in a bricks-and-mortar store.
The bankruptcy filing a year ago spooked brides-to-be into avoiding David’s stores, despite extensive efforts by management to reassure customers and speed the company through the Chapter 11 court process. The chain sells casual and modern gowns, while also marketing dresses and accessories for other wedding-related events like bridal showers and rehearsal dinners.
Rivals pounced
The company underestimated the negative impact that Chapter 11 would have going into its strongest selling period, and the competition “took advantage of it,” Marcum said.
David’s operates about 300 stores across the U.S., Canada, U.K., and franchise locations in Mexico, according to its website. The company kept almost all of its stores open through its bankruptcy proceeding. The renewed struggles come while the 69-year-old retailer faces stiff competition and rising costs from the U.S trade dispute with China.
The retailer filed for bankruptcy last November and emerged by early January with around $300 million of debt on its balance sheet in a debt-for-equity swap that handed ownership to existing creditors. But David’s still has had trouble keeping up with payments, the people said.
The Conshohocken, Pennsylvania-based retailer brought in a new board of directors with members from Boston Consulting Group and Oaktree, which was among the lenders that took control after last year’s bankruptcy. An Oaktree representative declined to comment.
Smart customers
David’s lost its way with customers under prior management, Marcum said in the interview. When the company launched its online marketplace, it was a separate e-commerce profit that had different pricing and marketing promotions than the stores. “Consumers today are very smart and they see that,” Marcum said. “It caused a lot of friction” and an “extremely poor experience” for customers.
Competitors are mostly boutiques that execute well, and are “very good at the service level,” Marcum said. “But David’s value proposition, when stacked up against them, is very strong.”
With the new capital, David’s will roll out improved marketing and align the e-commerce pricing with the stores, he said. It’s investing in digital marketing, more than doubling its social media teams and public relations staff to reach customers.
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