Chico’s weighs buyout while trying to move beyond mall

Bloomberg

Malaise in the shopping mall is certainly no secret, with thousands of stores shutting and some familiar names disappearing. Struggling women’s apparel merchant Chico’s FAS Inc now has a potential lifeline — which it may throw back.
The retailer said it would review an unsolicited buyout bid from Sycamore Partners, the owner of office supply giant
Staples Inc and department-store chain Belk, noting that it had previously rejected a higher offer from the private equity company.
Chico’s is part of a hard-hit category that targets mature women. Its peers include clothing stores like J Jill Inc and Dressbarn, operator of Ann Taylor and several other labels, which Bloomberg reported is on the block.
Merchants in the sector have struggled to find their footing with competition from department stores and online brands.
“The reality is there are very few of them left,” Instinet analyst Simeon Siegel said. Their customers tend to be mothers who won’t spend on themselves “if anything goes bad,” Siegel said.
Sycamore offered $3.50 per share, less than a previously-spurned attempt to pay $4.30 a share, Chico’s said.
“The Chico’s FAS Board of
Directors will carefully review the proposal to determine the course of action that it believes is in the best interests of Chico’s FAS shareholders,” the company said in a statement.

Not Much Debt
The offer price discounts the strength of the company’s brands and potential for a turnaround, B Riley analyst Susan Anderson wrote in a note.
Still, Sycamore’s interest is a positive. There’s been little private equity interest in specialty retail for several years given the decline of the shopping mall, according to Anderson. Once-familiar names like the kids apparel chain Gymboree Inc and discount shoe seller Payless Inc liquidated this year after second trips to bankruptcy court. Representatives from Sycamore declined to comment.
Chico’s net income plunged by almost two-thirds last fiscal year, while its stock has tumbled 60 percent in the past 12 months. Chico’s has advantages. Unlike some of its peers left with unmanageable debt following leveraged buyouts, the company owes just $57.5 million, leaving more resources available for a turnaround.
The retailer appointed former Hudson’s Bay CEO Bonnie Brooks as its interim CEO following the resignation of Shelley Broader. It’s looking for a permanent replacement.
The company is selling clothing and intimate apparel in
partnerships with ShopRunner, Amazon.com and QVC Inc.