Sycamore Partners-backed department store chain Belk Inc. told creditors it’s looking to cut costs and expects weaker earnings in 2023, according to people with knowledge of the matter.
(Bloomberg) — Sycamore Partners-backed department store chain Belk Inc. told creditors it’s looking to cut costs and expects weaker earnings in 2023, according to people with knowledge of the matter.
The retailer expects its revenue to drop 3% compared to a year earlier, said the people, who asked not to be identified because the matter is private. It also estimates that its adjusted earnings before interest, taxes, depreciation and amortization will land at around $230 million, down from an earlier estimate of $240 million. That is still a substantial rise compared to last year, they said.
Belk, which previously filed for bankruptcy in 2021, is the latest retailer to feel the pinch from inflation and rising interest rates.
Messages left with Belk were not returned, while a representative for Sycamore declined to comment.
Charlotte, North Carolina-based Belk also has to contend with a significant jump in its debt servicing costs as it can no longer defer interest payments, a feature known as payment-in-kind, the people said. Its interest expense is set to double to $90 million this year, the people added. It faces loan interest payments in August.
The retailer told some vendors that it plans to explore options to rework its debt stack, other people with knowledge of the matter said.
Moody’s Investors Service cut the company’s corporate credit ratings to Caa3 in February, citing Belk’s unsustainable debt load and growing interest burden. The retailer has an asset-based revolver that comes due in August 2024, followed by first-lien term loans that mature in 2025, the credit grader said.
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