Eddie Bauer Files for Bankruptcy, Seeks Quick Sale
Eddie Bauer has been around since 1920, but the 370-store
apparel chain is looking at its second Chapter 11 bankruptcy filing since
2003.
The turnaround under the court’s protection could be pretty
quick if CCMP Capital Advisors LLC is given permission to buy the chain
for the $202 million it has proposed. CCMP has agreed to buy Eddie Bauer,
assuming its offer is not topped by another bidder, and operate it as an
ongoing concern.
The chain, which is targeted to adults 30 – 54 with an average
annual income of $77,000, has not made a profit in three years, according
to a Bloomberg report.
Neil Fiske, president and chief executive officer of Eddie
Bauer, said in a press release, “Eddie Bauer is a good company with a great
brand and a bad balance sheet. This process will allow the business to
emerge with far less debt, positioned for growth as the economy recovers
and as our new products gain traction. We expect this process to be completed
very quickly, protecting our employees and critical vendor partners every
step of the way.
“We have made good progress on our turnaround strategy of
returning Eddie Bauer to its heritage as an active outdoor brand and have
exciting new product launches on the way to market, including First Ascent,
our return to expedition-grade outerwear and gear. Unfortunately, a crushing
debt burden placed on the company from the Spiegel reorganization in 2005,
combined with the severe, prolonged recession, have left us with no choice
but to use this process to reduce the debt load on the business.”
Discussion Questions: What would
you say is the outlook for Eddie Bauer? What will the company need
to do if it is to turn its business around?
I think Neil Fiske said it best…”a great brand and a bad balance sheet.” Both were inherited when Neil took over two years back. I am quite confident that Eddie Bauer will not only survive, but thrive. They certainly lost their way years back; however, Neil and his team have pointed the company in the right direction. The “new” Eddie Bauer is true to its roots, and the foundation on which it was founded close to 90 years ago. A fresh balance sheet and less like Gap, more like Lulu Lemon and REI is the formula for success.
I question whether the Eddie Bauer has much relevency. It has been quite a while since they were anything but another clothing store. Their rugged sports heritage was left behind years ago. Will young boomers and Gen X have enough fond memories to revive the brand?
The brand has some loyal consumers but no money because of the debt. If the bankruptcy process manages to control the debt and if a strategy can be developed (and financed) to expand the brand image to new consumers, then Eddie Bauer has an opportunity for success going forward. Neither of these goals is going to happen easily or quickly, however.
EB has a bad balance sheet and 2 BKs because it is ceasing to deliver a value promise to its customers. Why go to a specialty sporting goods retailer when there are so many mass, discount, and online choices that deliver the same products (or better) for less? Eddie Bauer cannot afford to run stand-alone stores and target only outdoor customers. They need to differentiate themselves, yet remain profitable as a company. EB should re-examine its pricing and customer service and get back to the core brands and prices which enabled them to succeed in the first place.
Another sad example of a great iconic brand ruined by the “other people’s money” crowd looting the brand of profitability for years. Known for beautiful stores and durable clothing, has the customer moved on while the brand remained stagnant? Probably.
I am always concerned when a brand says “we have to go back to our roots.” Why did they leave their roots in the first place? Why did Eddie Bauer move into more everyday wear? Why did they move into house wares and furniture? Why did they build stores? Maybe because their roots were not delivering what they used to.
In this case, Eddie Bauer has little or no chance of success. In the market of their roots there are bigger brands with better products. And on the casual side, how fashionable can the Eddie Bauer brand be with the roots of its heritage.
I am sure somewhere in their new business plan it will say something about the fondness baby-boomers have for the brand, how much disposable income baby-boomers have and how they are a large and growing demographic. Those words have become cliches in all too many business plans explaining their rationale for resurrecting brands.
I live in Denver, in what should be prime EB territory (and maybe it is, I don’t know). A mile from my house is a 90,000-s.f. R.E.I. flagship store that is so busy on weekends that it creates parking lot rage among otherwise nice people, and where a bank-style queue is necessary to control traffic at the cashwrap.
What EB needs to do to build on their legacy is to avoid imitating the strategies of and the product mix carried by R.E.I. (in other words, becoming a pale version of the big co-op), and instead build up something that is uniquely theirs yet geared toward the 21-50 demographic that so loves R.E.I.. I’m a 47-year old man, and I’ve bought a lot of clothes from EB over the years because they’re one of the few stores in the mall that carries things that don’t look like they were made by kids for kids. So I wish them well. I just hope they can come up with something that differentiates themselves from everyone else AND is relevant for today’s consumer.
The critical error was made long ago when Speigel (former owners) decided to compete with Gap by selling casual apparel only and by opening hundreds of stores across the U.S. The “specialness” was let out of the bag back then (’90s)and they’ve never really recovered.Smells like doom to me, especially in this environment.
I think the question depends on what transpires in bankruptcy. If CCMP wins the auction, and continues to operate EB as a retailer much as it exists today, they may have a tough go of it. I wonder if the brand has lost too much cache to remain viable as a stand-alone retailer in this economy.
If CCMP doesn’t win the auction, and it is broken up in bankruptcy, it would definitely have meaning as an ecommerce business, or as a niche brand. In that event, I think it would certainly mean more than other post-liquidation brands like Linens ‘n Things or Circuit City.
EB is a great brand but in the present form, you can kiss it goodbye like a lot of others like them. The only winners are going to be the focused and the flexible. At this point, EB is neither.
If they are willing to truly shrink, increase quality, focus on a core market, and build a strong web presence they will have a chance–and I say only a chance–at survival. Otherwise, they will be gone.