Clothing apparel giant J.Crew, which operates the J.Crew and Madewell brands, filed for bankruptcy on Monday, becoming the first major US retailers to file for bankruptcy protection as the coronavirus pandemic forced a wave of store closures. J.Crew is the first high-profile retailer seeking bankruptcy protection after falling prey to the coronavirus pandemic.
However, it is one of the many brick-and-mortar retailers across the globe who have been pushed to the brink with widespread store closures due following the coronavirus outbreak. Brick-and-mortar retailers are one of the biggest casualties of the Covid-19 outbreak that is costing the industry millions of dollars and thousands of job losses.
J.Crew begins Chapter 11 proceedings
The clothing retailer said on Monday that it has already filed to begin Chapter 11 proceedings in federal bankruptcy court in the Eastern District of Virginia. It has also reached an agreement with its lenders to eliminate $1.65 billion of debt into equity.
However, J.Crew intends to stay in business and continue operations to successfully reemerge from bankruptcy to become a profitable company again. The group estimated both assets and liabilities at between $1 billion and $10 billion in its bankruptcy filing.
Anchorage Capital Group, Blackstone Group's GSO Capital partners and Davidson Kempner Capital Management hold significant portions of J.Crew's senior debt and are likely to take control of the company. The existing lenders will be helping J.Crew with $400 million in finances to fund operations through bankruptcy. The company in a statement said that it will "continue all day-to-day operations, albeit under these extraordinary COVID-19-related circumstances." And try to open stores as quickly and safely as possible.
J.Crew to permanently close some stores
Although J.Crew, known for its preppy clothing once worn by former first lady Michelle Obama, is hopeful about bouncing back, it is contemplating closing some stores permanently. However, the exact number of stores it plans to shutter is yet to be determined. J.Crew, which launched in 2006, operates 182 J.Crew retail stores and 140 Madewell stores.
However, all these stores remain closed after the government asked for all non-essential businesses to temporary close in a bid to contain the spread of the deadly coronavirus. According to Moody's J.Crew had roughly $2.5 billion in annual sales and about $93 million in total liquidity as of February.
The coronavirus pandemic has been taking its toll on retailers, with widespread store closures on fears of the virus spreading. Reportedly, retailers like Neiman Marcus and J.C. Penney, are also under pressure to potentially file for bankruptcy sooner than they hoped. J.C. Penney recently skipped an interest payment. Much like J.Crew Neiman Marcus is also in discussions about financing to fund its bankruptcy.
J.Crew had already been suffering for a while, as consumers continue to shift towards online. Moreover, the retailer also lost a large number of consumers after it made a strategic mistake of raising prices. The company had earlier avoided bankruptcy in 2017 in a deal with creditors that reduced total debt and pushed out due dates on obligations.