Francesca’s has filed for Chapter 11 bankruptcy protection as the ailing retailer seeks a sale of both its brick-and-mortar locations and its ecommerce holdings. The company will continue operating during the process by utilizing a $25 million debtor-in-possession loan from Tiger Finance.
The company will go forward with previously announced plans to close 140 stores and renegotiate a number of leases at other locations, which may result in further closings. As of the filing, Francesca’s still operated 558 locations.
“Implementing this process allows Francesca’s to address our lease obligations and seek a new investor that can see Francesca’s into the future,” said Andrew Clarke, CEO of Francesca’s in a statement. “The financing provided by Tiger will enable Francesca’s to pursue a sale process that will allow us to continue to focus on our omnichannel strategies, optimize our boutique fleet, broaden our customer reach with brand extensions and drive sustainable, profitable growth.”
Francesca’s was struggling even before the pandemic put extra pressure on mall-based retailers. The company first considered a potential sale in February 2019 after then-CEO Steve Lawrence departed, but that summer it entered a $110 million loan credit agreement with Tiger Finance to assist with a growth plan instead.
COVID-19 put a damper on the turnaround effort: Francesca’s reported drops of 29% in sales and 5% in comparable sales during Q2 2020 after traffic levels fell at brick-and-mortar retailers across the country. This led to a second round of exploring strategic alternatives and ultimately the decision to sell itself.
Francesca’s expects to hold a structured auction by Jan. 15, 2021 and conclude its sale by Jan. 20.