J. Crew files for bankruptcy amid pandemic

NEW YORK — The owner of J.Crew is filing for bankruptcy protection, the first major retailer to do so since the pandemic forced most stores in the United States to close.

More retail bankruptcies are expected soon with thousands of stores still shuttered, though some states have begun a staggered restart of their economies.

March sales at stores and restaurants had their most severe plunge on records dating back to 1992. Clothing sales fell more than 50% that month and, in the timeline of a pandemic, those may have been the good days.

The U.S. Commerce Department reports retail sales figures for April next week. That report will reveal the full brunt of the pandemic because by the beginning of the month, the doors of almost every retailer had been ordered shut.

The abrupt closure of stores threatens the overall health of the U.S. with consumers driving 70% of all economic activity in the country. Hundreds of thousands of retail workers have been furloughed, meaning they’re not likely participating in the economy in any significant way.

J.Crew said Monday that lenders have agreed to convert $1.65 billion of its debt into equity. It’s also secured commitments for financing of $400 million from existing lenders Anchorage Capital Group, L.L.C., GSO Capital Partners and Davidson Kempner Capital Management LP, among others.

J.Crew, like a number of major retailers, was in trouble before the pandemic and it was laden with debt.

The company’s roots date back to 1947, when Mitchell Cinader and Saul Charles founded Popular Merchandise Inc., which sold low-priced women’s clothing. It was renamed J.Crew in 1983 and retooled as a preppy catalog to compete with Lands’ End and L.L. Bean.

It became a fashion staple by the 1990s and new stores popped up across the country. Former first lady Michelle Obama elevated the brand even further during her eight years at the White House.

In 2011, J.Crew became the first mass fashion brand to show its designs at New York Fashion Week.

Industry analysts are skeptical about a second act. Neil Saunders, managing director of GlobalData Retail, called the company’s $1.7 billion in long-term debt “crippling.”

“Before Chapter 11, J Crew was on a slow march to ruin,” Saunders said.