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CNBC: J.Crew May Be Exploring A Bankruptcy Filing, Along With Neiman Marcus And JCPenney

J.Crew is reportedly preparing for a bankruptcy filing that could come as soon as this weekend, people familiar with the matter told CNBC. The sources claim that J.Crew is working to secure $400 million in financing to remain operational during the process, but noted that plans are not yet finalized.

J.Crew had approximately $2.5 billion in sales for the year ended Feb. 1, and saw “meaningful improvement” in 2019, according to Moody’s. The retailer has continued pursuing turnaround options: it launched a “headless” e-Commerce experience during the holidays that helped the company withstand demand spikes as high as 4X the usual volume without interruption, and it looked into a planned spinoff of the Madewell brand that may have been stopped by the pandemic.

However, COVID-19 has weighed heavily on brick-and-mortar retailers, particularly those that were either already struggling or engaged in turnaround efforts. Anonymous sources also have reported that JCPenney and Neiman Marcus are exploring bankruptcy proceedings, and there may be other brands quietly weighing their options.

“[Neiman Marcus and JCPenney] were going into the situation weak to begin with, and this was the straw that broke the camel’s back,” said Mickey Chadha, VP – Senior Credit Officer at Moody’s in an interview with Retail TouchPoints. “If you look at the weaker players throughout retail who have entered this pandemic, they are all going to come out even weaker, if they do come out at all. We were already seeing overall bifurcation between the haves and have-nots, and it’s just going to accelerate as we come out of this.”

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JCPenney has reportedly hired consulting firm AlixPartners LLP and may be looking at options including rescue financing, non-bankruptcy changes to its debt and bankruptcy, according to The Motley Fool. The retailer has $105 million in bond repayments due in June, and it is unlikely that the retail industry will make a robust recovery before then.

A Neiman Marcus spokesperson told Retail TouchPointsthat the company is “evaluating all courses of action to preserve our financial strength.” The retailer is seeking ways to ease its $4.6 billion debt load, which already has led to the closure of most of the retailer’s off-price Last Call stores.

The loss or severe diminishing of multiple retailers seems likely to occur this year, and the individual companies aren’t to blame: the U.S. economy contracted 4.8% during Q1 2020, and more than 30 million people have filed for unemployment benefits. These conditions, especially combined with social distancing’s impact on sales, create an atmosphere where even well-thought-out turnaround plans can fail to gather the necessary momentum.

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