What Bankruptcy Means For Belk Going Forward
The department store Belk is filing for bankruptcy. The retailer is headquartered in Charlotte, and the Belk family name has been a mainstay around here for decades.
The first store opened in Monroe in 1888, and Belk now operates 300 stores across the Southeast. But like many other department stores, Belk has struggled recently, and the pandemic has made that worse. In this week's BizWorthy, the Charlotte Ledger Business Newsletter's Tony Mecia joins us to talk about what this bankruptcy could mean.
Lisa Worf: Good morning, Tony.
Tony Mecia: Good morning, Lisa.
Worf: So, bankruptcy sounds dire, but is that the case with this one? After all, the chain and its owners say things are going to continue operating as normal.
Mecia: Well, yeah. I mean, I think when you put out a press release and you say you're filing for bankruptcy, you always try to put a good spin on that. But in this case, I think actually there is some positive news coming out of it. What bankruptcy is, it's an opportunity for companies to reorganize their finances, get everything together, come up with a new plan and emerge stronger while paying off their creditors or at least having a plan with their creditors.
I think that's especially true here with Belk, because this is a bankruptcy that's known as a prepackaged bankruptcy in that they're going to go in with a plan that most of the lenders have already agreed to. They're going to use the powers of the Bankruptcy Court to do a few things that you can't do outside of court and then emerge stronger. They're getting more money coming in from their owner, Sycamore Partners, so that's another good sign. So, there might be some silver linings to this. Not to make it sound too rosy, but it is an opportunity really to reorganize and come out stronger.
Worf: And do you think we'll see stores closing? I mean, their flagship one is here at SouthPark Mall, but they have a whole bunch in smaller towns across the Southeast and in North Carolina, too.
Mecia: Yeah, I mean, that's a lot of stores. You have 300 stores there. You know, Forest City, Lenoir, Dunn, North Carolina, Asheboro. I mean, these are not big, thriving metropolises by any stretch of the imagination. You know, a Belk spokeswoman did come out and say, well, they do not anticipate any layoffs or store closings.
I would just point out that would be, I think, sort of unusual for them to go through this and not have layoffs or store closings. One of the things you can do in bankruptcy is you can just get out of your leases — you can void your leases. So, if they have stores that are tremendously underperforming, they could just walk away from those stores.
Worf: Now, it's been just over two weeks since Mecklenburg County's health director issued a COVID-19 directive urging people to stay home. And you had some data about how that's going in the most recent edition of the Ledger. So how is it looking? Are people following this?
Mecia: As you point out, the county, twice a week, puts out a lot of data about COVID and about social distancing and hospitalizations, that sort of thing. Data they put out this week, on Tuesday, shows that a measure of social distancing that uses cellphone data to track how often people are out of their houses stayed pretty flat, actually, for the last month.
And if you look at when the COVID directive came out on Jan. 12, I mean, it's just completely flat. You don't see any difference, really, one way or the other, which suggests that most people are not really paying very much attention to this COVID directive, which probably, I would guess, Lisa, comports sort of anecdotally with what people are seeing if you've been driving around lately.
Worf: Now, you also got some email exchanges between county health officials trying to craft this directive, and it came about really quickly. Anything surprising about these exchanges?
Mecia: Well, I think the thing that would be the biggest surprise, Lisa, is just, as you said, how quickly everything came together. In the private sector, if you have a document that you're preparing that's a big, important document, it can take rounds of meetings. It can take days, weeks, months sometimes to sort of put together. This directive, it appears, came together over the course of about 24 hours. It went from a very rough draft at 4 p.m. on a Monday to being sent out in a press release the following day, Tuesday, around 5 o'clock. So, there are a few back-and-forths. They modeled it on the state's directive.
Worf: And one of the discussion points, too, was, "What do we call this thing?" What were the other names that came up? After all, this is not binding.
Mecia: Right. So, throughout the discussions, there were emails back and forth from Gibbie Harris, the health director, asking some of her deputies, "What should we call this thing? The (North Carolina) Health and Human Services secretary called it a directive. Should we call it an advisement?" And then she said, "Well, what about prescription? The county is our patient. We can call this a prescription." And one of her assistants said, "I like 'directive.' It sounds strong and bold."
Worf: That's the Charlotte Ledger's Tony Mecia. Thanks, Tony.