David's Bridal might file for bankruptcy

David's Bridal, the nation's largest wedding retailer, is flirting with the idea of bankruptcy after missing a key debt payment. The retailer has been struggling over the past several years due to declining marriage rates and growing competition in the digital space. This was a signal to creditors that some kind of restructuring is about to take place, and when debt payments are missed, usually bankruptcy follows.

There's a "very high likelihood" of bankruptcy or a consensual debt restructuring for David's Bridal, said Mathew Christy, an S&P Global Ratings analyst who tracks the retailer.

According to USA Today, David's Bridal said that they voluntarily missed the payment so they can negotiate a deal with their creditors. This means they still have the power to make a payment, but in this case bankruptcy might be a smarter option. The company does have a 30-day grace period to still make a payment, but S&P says it is unlikely.

"Our financial outlook is strong and we have ample liquidity to meet our key business objectives today and in the future," David's Bridal said last Thursday in a statement. "With the assistance of our financial and legal advisors, we are engaged in discussions with our lenders in order to reach a mutually agreed upon resolution designed to strengthen our balance sheet so we can increase our financial flexibility and further invest in our business."

Realistically, the company's debt outweighs their revenue. They are still taking in over 791 million dollars a year in revenue, and sell one out of every three wedding dresses in the United States according to IBIS World. Although they are turning a profit before interest, taxes and debt payments, they still have over 1 billion dollars in debt stemming from their 2012 acquisition by private equity firm Clayton, Dubilier & Rice.

David Bridal definitely has the sales to keep it in business, but bankruptcy restructuring could force them to close some stores. With the growth of online sales no traditional brick-and-mortar retailer is safe.

photo: courtesy of David's Bridal