David's Bridal: Can software revamp save Conshy firm from wedding crash? | Update

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David's Bridal has followed its customers onto mobile apps while trying to keep orders flowing through its 300 stores busy. The company has sought help restructuring its debt, which is junk-bond-rated by Wall Street credit agencies

MAY 29: In a world where $100 fitted prom gowns can be mailed to American teenagers from Asia, leadership at David’s Bridal and other U.S. special-occasion dress-store chains need “tangible ideas to grow” — but those have been hard to find, says a person familiar with the Conshohocken company’s prospects as it seeks to reorganize its debt finances, who spoke on condition of anonymity.

“New Asian-based websites such as JJ’s House,” a Hong Kong-based site that cultivates a reputation for delivering “special-order gowns in shorter time frames at cheaper prices,” are winning market share at a time when the number of U.S. weddings and other sources of dress orders have been “stagnant,” the source adds. (JJ’s, by the way, is unrated by the U.S. Better Business Bureau, which says JJ’s has a no-returns policy that can leave new owners of poorly-fitted dresses out of luck.)

The person also says David’s has plans for shuffling leadership in its IT division, in hopes of “moving the department to a dev-ops model,” a streamlined system that would allow for staff cutbacks, which he adds have been announced for this summer. I asked David’s for comment, will add if they have more to tell.

MAY 24: David’s Bridal, the 300-store U.S. wedding-store chain based in Conshohocken, has hired financial-restructuring advisers at New York investment bank Evercore, plus lawyers from Debevoise & Plimpton, “to help turn around the budget-priced business,” reports Bloomberg News.

A company official at the Conshohocken office, who spoke on condition they not be named, confirmed to me that David’s has hired restructuring professionals, adding that David’s is not considering bankruptcy, does not plan to close stores, and is conducting business as usual.

David’s is profitable on an operating basis, but it owes creditors more than $700 million, with most of the money due this year, Bloomberg reported. Moody’s and S&P rates the company’s debt at junk-bond levels, meaning lenders shouldn’t expect to get paid all they are owed. The company’s bonds, as a result, have been trading at deep discounts to face value.

A restructuring could result in an extended debt-repayment schedule, new investors, a transfer of ownership to creditors in exchange for debt forgiveness, a new business plan, or other changes. Restructurings can result in store closings when creditors and owners don’t agree on plans to keep all or part of a chain in business.

David’s also said in a statement that chief executive Paul Pressler has been replaced in that job by his second-in-command, Paul Key. Pressler, a former Gap retail-chain executive, had run David’s since the Clayton Dubilier & Rice buyout firm bought a controlling share from Leonard Green & Partners for $1.05 billion in 2012. Pressler remains David’s board chairman.

The wedding business has come under pressure as fewer Americans get married. The number of marriages rose slightly in 2016, to 2.25 million, but remains below the totals from the early 2000s, when the nation’s population was smaller. The rate at which Americans get married has declined, to 6.9 weddings per 1,000 people in 2016, from 8.2 per 1,000 in 2000, according to the Centers for Disease Control and Prevention.

Key, who is also a former Gap executive, in a statement said that he sees “tremendous opportunity for David’s Bridal to continue to grow in weddings and beyond.” Besides its U.S. stores, David’s has outposts in Britain and Canada and a franchised operation in Mexico.

David’s rival Alfred Angelo, founded in Philadelphia in 1933, declared bankruptcy and shut its 60 stores last year, leaving brides without their dresses, the Inquirer reported at that time. David’s offered Angelo customers a discount. Gap plans to end its Weddington Way wedding brand. J. Crew got out of the business in 2016.

David’s stores “tend to be in smaller strip malls, not necessarily your typical [larger retail] malls,” according to a report from Trepp, a New York firm that tracks commercial real estate investments and troubled properties. The chain operates stores as large as 150,000 square feet, as big as a couple of blocks of suburban homes.