Retailer Neiman Marcus latest to file bankruptcy Luxury chain is 2nd to seek protection during pandemic
NEW YORK — Neiman Marcus has filed for Chapter 11 bankruptcy protection, the first department store chain and second major retailer to be toppled by the coronavirus pandemic.
The move by the 112-year-old storied luxury department store chain was announced Thursday and follows the bankruptcy filing by J.Crew on Monday. Experts believe there will be more to come even as businesses start to reopen in parts of the country.
“Before COVID-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth,” said Neiman Marcus Group CEO Geoffroy van Raemdonck in a statement. “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 filing comes as the global luxury goods sector is heading for a stunning collapse of up to 35% this year due to coronavirus lockdowns, according to Claudia D’Arpizio, a partner at Bain & Co. The forecast represents a much steeper decline than the single-digit drop recorded after the 2008 recession. D’Arpizio said it would take two to three years to return to 2019 global sales of around $303 billion.
Dallas-based Neiman Marcus, which operates 43 stores, said it expects to emerge from bankruptcy by this coming fall. A company spokeswoman said no mass closings are planned.
In order to keep operating during the restructuring, Neiman Marcus says it has secured $675 million in financing from creditors holding over two-thirds of the company’s debt. The bankruptcy filing is a big blow to Ares Management and the Canada Pension Plan Investment Board, which bought Neiman Marcus in 2013 for $6 billion.
The filing arrived after the department store, burdened with debt, had failed to make a payment to a key bondholder as its stores went dark to help contain the spread of the virus.
More than 60% of U.S. retailers have likewise temporarily shuttered since March, but department stores were already in a weakened state long before then. Americans are no longer interested in doing all their shopping under one roof, instead picking and choosing items like shoes or tops. When they do buy clothes, they head to T.J. Maxx and online retailers.
“Department stores have been struggling for a long time,” said Craig Johnson, president of Customer Growth Partners, a retail consultancy. “Now, it’s a blood bath. How many will survive is unclear.”
J.C. Penney, which had been trying to claw its way back after a disastrous reinvention plan in 2013, recently elected not to make a $12 million debt payment. That is setting it on the path of a potential bankruptcy.
Macy’s, the nation’s largest department store, confirmed it was looking to raise debt to add more liquidity to its balance sheet. Macy’s CEO Jeff Gennette said on a conference call that it will be emerging from the pandemic as a “smaller company” and may accelerate store closures.