Struggling retailer Body Central Corp. has hired an investment bank to pursue strategic alternatives.
The company announced on April 23 that it tapped Houlihan Lokey Capital Inc. to pursue a range of financing, transactional and strategic alternatives. Houlihan Lokey's Derek Pitts and Subhi Gupta are acted as financial advisers. Body Central says it won't disclose developments until and unless the board of directors approves a transaction. The company has appointed a special committee for the exploration process.
Body Central, headquartered in Jacksonville, Fla., sells clothes and accessories, most for less than $20, through Body Shop and Body Center stores, as well as bodycentral.com and catalogs. The company's brands include Body Central, Sexy Stretch and Lipstick Lingerie. Body Central's main competitors are Forever 21, Wet Seal, Rue 21 and Charlotte Russe.
Body Central's hiring of Houlihan Lokey comes after the company had taken several steps to improve operations, including closing underperforming stores and entering into a new credit facility.
The company closed 12 underperforming stares between Dec. 29 and March 17, and anticipates closing another five stores in 2014. As of Dec. 31, the company had 294 stores in 28 states. While it may not open any new stores in 2014 because of negative cash flows, it has identified locations to expand to in 2015, or whenever it generates sufficient cash flows from operations, the company says in a March 27 filing with the U.S. Securities and Exchange Commission.
In February, the retailer entered into a new asset-based credit facility with Crystal Financial LLC for a $17 million senior secured facility that includes a $12 million term loan and $5 million revolving credit facility.
For the year ended Dec. 28, 2013, the company incurred a $53.4 million loss from operations, partially because the company had to mark down merchandise to clear slow-moving inventory from stores earlier in the year. The clothes weren't selling because of the company's failure to anticipate target customers' preferences, the company says. Body Central's accountant, PwC, said in March that negative cash raised substantial doubt about the company's ability to continue as a going concern.
Body Central reported about $311 million in revenue for 2012, compared with roughly $284 million in 2013. In fiscal year 2013, Body Central's stores generated almost 90 percent of the company's revenue, with sales of $254.7 million. The company's catalog and online business brought in about $29 million.
For last week's edition of Turnaround Tuesday, see "Alion Science Works to Refinance Notes."
For more struggling companies, see Mergers & Acquisitions Distressed Company Watch List.