The retailer lost $9 million last year, and $6.4 million in the first quarter of this year alone.
Struggling Filene’s Basement staved off disaster with a new line of credit yesterday – but its troubles aren’t over.
Despite denials from the company, sources say Chairman and CEO Sam Gerson has told them he will shut 12 of the 51 Filene’s Basement stores around the U.S.
The discounter has two stores in Manhattan.
Filene’s Basement still has to convince nervous vendors that it is not on the brink of bankruptcy, and they can start shipping merchandise again.
Some stopped shipping last week, spooked by word that Filene’s Basement was shopping for a new credit line, with two years to go on the old one.
A Filene’s Basement spokesperson said the new, $125 million credit line from G.E. Capital and Paragon Capital was simply a better loan.
But industry sources are speculating that the old lender, BankBoston Retail Finance, wanted out of the deal.
BankBoston refused to comment. But last month it hiked Filene’s Basement’s interest rate and demanded that the retailer accept new restrictions.
Vendors and investors have been worried about Filene’s Basement for some time. The retailer lost $9 million last year, and $6.4 million in the first quarter of this year alone, as it marked down merchandise that wasn’t moving.
The stock is now trading at 17/32, although it gained 3/16 after the news of the new loan hit.
Some in the retailing community compare Filene’s Basement’s troubles to bankrupt Loehmann’s.
“They got away from what they were good at, marking down high quality merchandise,” said one source. “The clothes they were offering were lower in quality.”
Filene’s is now attempting to remake itself. Earlier this year, it launched a new concept called “Aisle 3.” Aisle 3 stores, open only on weekends, sell higher quality apparel and home accessories.
The new stores, in Rockland County, New Jersey and Maryland are doing well so far, and the company plans to open several more by the end of the year.