Luxury retailer Neiman Marcus has become the first department store chain to declare bankruptcy during the coronavirus pandemic. Its fall is foreboding to other chains, whose financial distress predates the health crisis, such as J.C. Penney.
Neiman Marcus, known particularly for its extravagant "Christmas Book" catalog, plans to use the bankruptcy proceeding to restructure its debt-laden, money-losing business, handing over the majority stake to its creditors. This echoes the news from J.Crew earlier this week, which became the first retailer to head into bankruptcy during the COVID-19 pandemic.
Both Neiman Marcus and J.Crew were among the flagging retailers that had been searching for a revival path before the health crisis. They were in a big wave of retail companies bought out by private equity firms in the 2000s and early 2010s, which loaded them with massive debt. Then, the retailers struggled to keep up with trends and the demands of online shoppers.
"Prior to COVID-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth," Neiman Marcus Group Chairman and CEO Geoffroy van Raemdonck said in a statement on Thursday. "However, like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business."
The pandemic has left non-essential retail stores and malls shut for weeks. Clothes shopping has all but ground to a halt.
Neiman Marcus in mid-March temporarily shuttered all of its 43 stores along with its two Bergdorf Goodman stores and Last Call outlets. The company furloughed most of its 14,000 workers.
On Thursday, the company said the temporary closures were extending through May 31. But some stores in states including Texas, Maryland, Nevada and Georgia are open either for curbside pickup or by appointment. "The Chapter 11 process will not impact the timing of store re-openings," the company said.
Analysts are now watching other companies in financial distress, like J.C. Penney, Sears and Brooks Brothers — which are among those considering bankruptcies or sales, or looking to trim back their sprawling networks of stores.