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Brooks Brothers bankruptcy more evidence of pajama-working culture?

Jul. 08, 2020 9:13 AM ETM, XLE, JWN, VFC, SPG, TLRD, PVH, SKT, TCO, MACBy: Kim Khan, SA News Editor73 Comments
  • Brooks Brothers is filing for bankruptcy as the impact of COVID-19 proved too much for the clothing retailer founded in 1818.

Brooks Brothers will be looking for a buyer as it goes through reorganization (it had started evaluating store closures in April). It’s closed 51 of the 250 it was evaluating so far. That’s out of 500 stores worldwide. 

The retailer has already been looking at potential buyers for a year.

“Over the past year, Brooks Brothers’ board, leadership team, and financial and legal advisors have been evaluating various strategic options to position the company for future success, including a potential sale of the business,” a spokesperson told CNBC. “During this strategic review, Covid-19 became immensely disruptive and took a toll on our business.”

One reason for Brooks Brothers’ struggle was its big rent obligations, but the company was also feeling some effects of a change in traditional business dress and shift towards casual, despite its own moves into activewear.  

That loss in demand will only become more pronounced as people continue to work from home, some permanently.

Men’s Wearhouse owner Tailored Brands (TLRD), facing its own bankruptcy question, was flat premarket. PVH (PVH +0.2%), which has more traditional brands like namesake Van Heusen and Arrow, gained ground, but VF Corp. (VFC-0.1%), which holds outdoor brands like The North Face, slipped.

The Brooks Brothers move may also impact malls, where it maintains its own stores and also has wholesale deals with strugglers Macy’s (M+1%) and Nordstrom (JWN+0.1%).

Mall operator Simon Property Group (SPG, +1%), was higher, while Tanger Factory Outlet (SKT), Taubman Centers (TCO) and Macerigh (MAC) were about flat. 

Sector Watch

The SPDR Select Sector Energy ETF (NYSEARCA:XLE) has been a big drag on the market in the last two days, with crude prices unable to make a break above $41/bbl in the last two weeks.

Oil inventory numbers out this morning could give the sector a boost, but it will likely take a much stronger drawdown than the 3M analysts expect the EIA to report to get prices gaining traction. 

Failing that, refinery utilization could help if it shows a significant boost. But with rollbacks in openings and interstate travel quarantines, gasoline demand looks stagnant.

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Comments (73)

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Brooks Brothers filed for bankruptcy I wonder if TLRD will follow suit?
Rumors have circulated about TLRD going bankrupt for a month, but seem to have died down. Anyone taking a flyer on a 68 cent stock?
What changed in order for people to have anything further to add? They chose not to pay their interest payments on their bonds, and haven't been paying their landlords. Hopefully they give more info when they file their 10k, but Dinesh will probably stay with the status quo of not discussing the situation or fielding questions.
09 Jul. 2020
I finally bailed on TLRD with a 90% loss. It’s pretty clear they delayed their 10-Q filing in order to avoid tripping the coverage covenants and defaulting. They skipped the interest payment because they knew they had a 30 day window and that window would end after the deadline to finally file the 10-Q. They also restricted employee sales of the company stock, probably to avoid suits about insiders dumping pre-BK.

I think, best case, they do a pre-packaged BK and recapitalize quickly, with minimal business interruption. But either way, don’t see how the common ends up with anything.

The business itself would do fine in a world where weddings and proms are a thing, but that world is probably a long way off.
I'm in the same boat. Was down big since initially buying over a year ago and averaging down way too much. I sold half my position after it shot up for no reason a month ago . Decided to sell another half position after Dinesh basically gave the middle finger to shareholders on that annual shareholders meeting call. And finally sold the rest after they missed the interest payment.

The business is still very lucrative taking out the debt. Debt, mis-management, and of course covid was a deadly combination. The 2025 term loan is asset backed, so there is no saving Dinesh and the rest of the incompetent mgmt. The holders are probably salivating just waiting for this company to fall into their hands post bankruptcy.
Pajama-working culture might even be a stretch. Most people just in underwear.
If this was true you would see a large amount of shirts and ties being sold without the corresponding pants. Until that happens I dismiss this concept.
Risk Professor profile picture
Many years ago I wore a suit to some function, I can’t recall what. However, I do remember on the way home stopping at a liquor store and making a purchase without being carded. I was 19 and the legal drinking age was 21.
Don't need a suit for the Brooks Bros funeral.
BB has been struggling with falling demand for years. The COVID19 epidemic alone did not crush the brand.
nicholas davout profile picture
I bought my first suit for high school prom (1968) and my second suit for my first wedding in 1973. They still hang in my closet, like new, unworn for last 20 plus years. I think I threw on a sport jacket once or twice in the last 20 years for a financial/legal meeting.
08 Jul. 2020
I used to buy Brooks Brothers shirts years ago...Charles Tyrwhitt better value for the money.
Buyandhold 2012 profile picture
That's where I buy my suits.

Now where will I go to buy my suits?
@Buyandhold 2012

Where do you wear suits?
I wear a suit when I meet with most clients. Clients in Seattle get kakis and an open blue shirt from me, .....while they wear jeans and tee shirts, and if its formal, socks.

I do not mind as long as the invoices are paid promptly.
Buyandhold 2012 profile picture

"Where do you wear suits?"

When I travel to foreign countries.

When I go somewhere that requires a suit, like the Four Seasons.
trustfun profile picture
BB used to make heavier weight cotton polos, now they are thinner and start ripping apart especially where the sleeve cuff is sewn together, maybe after twenty washes. LLBean's polos are thicker and better made, plus cheaper.
DividendNow profile picture
Another one bites the dust
Interestingly, the only time I need to wear a suit is to go to a wedding or funeral. Even church is casual these days.
Robert Lewis profile picture
BB was for a different time and a different workplace. I am 73 and as a young attorney I shopped at BB because I knew that I would always fit in with the clothes they sold me. It was a time when a suit was a uniform.
Nospheritu profile picture
@Robert Lewis I am 36 and love Golden Fleece and Black Fleece. The company survived two hundred years until poor management decided to race to the bottom instead of shrinking its footprint and targeting a different demographic. It’s a shame, I like wearing casual tailoring, it makes me feel clean and presentable.
Robert Lewis profile picture
They had to cut quality to compete against Suit Supply, Indo Chino and the rest. Simply walk in Soho and you will see 5 custom suit tailors for men, all under $1000.
@Robert Lewis

...Or they could've pivoted their business model to adapt to changing consumer demands. BB won't be missed. I used to wear their overpriced stuff but in the early 2000s when their quality started to suffer, i quickly jumped ship.

Same crap with JCrew. Do these brands not realize their consumers are not idiots?
Who purchase apparels during the pandemic??

I am very fearful that the majority of offline apparel retailers will go to BK.
I've been buying a ton of clothes for sale online.
kingRIG2.0 profile picture
@Investing Thyme. I’ll never buy clothes online, maybe socks and underwear only, I like to go try on my clothes at the store
BB is a shadow of its former self. They were the pre-eminent vendor of a unique style of clothing. Now they sell commodity goods with a brand label attached. They do need to shrink their footprint, but also reclaim their heritage. Becoming a smaller company may encourage greater focus on core goods, and enhance the ability to carve out a unique brand niche.
Kansas King profile picture
@john doe4944

I agree. I don't hate what BB was pedaling but it was always overpriced and generally rebranded for BB. I could find the same thing whether it be shoes, shirts, or suits for less elsewhere. I think the days of spending $80+ on non-tailored/bespoke dress shirts are a thing of the past (if it ever was a thing). For $60, I can get shirts made for my dimensions. I'm not saying $60 will get you a full bespoke fitting experience but it's close enough to look good.
Jack Bandit profile picture
solid advice.
Nospheritu profile picture
@john doe4944 Thom Browne seems to be doing fine after moving on. I 100% agree they should look back to their roots and go for quality. I think there is a healthy demand for boutique brands with pride in their products and history. It’s a shame management missed the boat. Similar death spiral as A&F.
CryoFX321 profile picture
A good example of a company (BB) that has had a difficult time reinventing itself. TLDR same thing. But I don't think their business woes have much to do with a pajama culture. They were both struggling long before work from home.
In fairness to TLRD, as a business they were hardly struggling. Yes, they had declining comps, but they were still pretty profitable. The Jos A Bank acquisition killed them by burying them in debt. Covid was the nail in the coffin. On the flip side, whoever gets control of the company post bankruptcy will probably have a very lucrative business. There will always be a need for suits, and TLRD has been shifting, albeit entirely too slowly, to the sportcoat business casual look.
anarchist profile picture
When I was young one had to wear a suit and tie to eat in a nice restaurant but now people go with jeans, T-shirt and a dirty ball cap. Middle-class American men have become slobs.
Jack Bandit profile picture
I don't disagree with us being slobs (at times) but maybe the shift toward casual is because people want to be less superficial. As the saying goes, "looks can be deceiving."
I'm a recently retired professional. When I started out in the 70's I always went to conventions in a suit and tie. Then it went to sport coat and tie (of course I wore pants too). Then sport coat and no tie (but still...sometimes a tie)...which I continued to wear until I finally retired in '18. I was repeatedly surprised (appalled?) at how many young, millennial colleagues would show up in shorts, tees and flip flops towards the end. Sigh.....
Surely this is a joke, "anarchist"
Brooks Brothers would have been bankrupt or sold at a distressed price in around 5 years anyway. C19 just expedited the process.
How's TLRD remained in business (Men's Wearhouse and Joe. A. Banks). Decidedly lower quality gear (but not horrible) at much more reasonable prices. Wearing suits and ties is going....going.....go................................
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