Neiman Marcus Group on Thursday became the first major department store group to file for bankruptcy protection during the coronavirus pandemic. It’s a stunning fall that follows the collapse of Barneys New York late last year and comes as shadows gather over chains like Lord & Taylor and J.C. Penney.
In a statement, the company said it received $675 million in financing from creditors to keep running the business, as well as $750 million it hopes will help it get out of bankruptcy by “early fall.” The creditors will become majority owners of the company, and Neiman Marcus expects to eliminate $4 billion in debt.
The company filed for Chapter 11 restructuring in the U.S. Bankruptcy Court for the Southern District of Texas. MyTheresa.com, the luxury retailer that Neiman Marcus Group bought in 2014 and later transferred to a separate entity, is not included in the filing.
In a letter to customers, Geoffroy van Raemdonck, chief executive of Neiman Marcus, said the company was not liquidating and would come out of bankruptcy “a stronger company with the ability to better serve you and continue our transformation over the long term.”
At the end of March the coronavirus pandemic temporarily forced the closure of all 43 Neiman Marcus stores, as well as its two Bergdorf Goodman locations and Last Call outlets, all but stopping sales and crushing revenue. But while that may have been the immediate cause of Neiman’s filing, its problems had been building for years. The company took on an untenable amount of debt as part of two leveraged buyouts by private-equity firms and did not respond quickly enough to changes in shopping habits. Together, those developments left the group in a precarious position even before the virus hit.
Neiman Marcus listed in filings about $5 billion in long-term debt as of April 2019. The company was sold in 2013 to a group led by Ares Management, a private-equity firm, and the Canada Pension Plan Investment Board in a $6 billion deal.
The pandemic has been disastrous for the already weakened retail industry. In March, sales of clothing and accessories fell by more than half. Those numbers are only expected to be worse for April, because many stores were open for at least some of March (e-commerce, a relatively small contributor to total sales for most store chains, is not enough to save them). Retailers have furloughed employees, slashed corporate salaries and hoarded cash in a desperate attempt to make it to the end of the shutdown. Earlier this week, the mass-market clothing company J. Crew filed for bankruptcy, the first major retail casualty during the pandemic. John Varvatos, the men’s wear brand, also declared Chapter 11.
The company said it would “continue to assess store closure decisions” for Neiman Marcus, Bergdorf Goodman and Last Call and reopen once it is safe to do so. Ten Neiman Marcus stores are now offering curbside pickup, and some temporary store closures will continue through May 31.
William Susman, managing director at Threadstone Advisors, said he expected the retailer to use bankruptcy to shed some of its leases and reduce its physical footprint, a situation that could make it more attractive to a potential buyer.
“Neiman Marcus has a bad balance sheet, but it’s still a luxury brand,” Mr. Susman said. “They still have a reason to exist.”
Neiman Marcus was founded in Dallas in 1907, just in time to become a magnet for new oil money. It built its reputation on an unabashed embrace of the trappings of luxury — and the dreams of those who aspired to own them, or experience them for a moment. It became famous for its extravagant Christmas catalog, which over the years offered items like an only-at-Neiman’s authentic Guinness pub-in-your-home for $250,000 and a $20 million submarine.
The company’s mastermind was Stanley Marcus, son of one of the founders — Herbert Marcus. (The other founders were Herbert’s sister, Carrie Marcus Neiman and Carrie’s husband, A. L. Neiman). Under his guidance Neiman Marcus became the first department store to hold a weekly fashion show for customers. On the occasion of the Texas Centennial Fair the store held a special extravaganza it called “100 Years of Texas Fashions” and Edna Woolman Chase, the editor of Vogue and a guest, said: “I dreamed all my life of the perfect store for women. Then I saw Neiman Marcus, and my dream had come true.”
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