J. Crew is being hit hard by the economic impact of the coronavirus. A new report from CNBC suggests that the clothing retailer is preparing to file for bankruptcy and that the filing could come as soon as this weekend.
The claims come from a source familiar with the matter, who noted that plans to file are not finalized yet and that the New York-based retailer is "working to secure $400 million in financing to fund operations in bankruptcy."
The news of potential bankruptcy comes after reports that the privately-held company has been struggling with a heavy debt load for years. The economic fallout from the coronavirus pandemic only exacerbated the problem.
J. Crew has been a staple of many celebrity wardrobes for years. Stars like Michelle Obama, Meghan Markle, and Kate Middleton have all been spotted publicly in J. Crew items. In recent times, though, the company has faced declining sales, as well as criticism for maintaining a high price point and idealized aesthetic that some felt made it feel out of touch.
The company has lost some of its top executives recently, including retail executive Mickey Drexler and creative director Jenna Lyons, who had been with J. Crew for 26 years.
People reports that Lyons herself became a fashion icon during her time at J. Crew. When she announced that she would be stepping back from the company, the news came as a surprise to those who knew how deep her relationship with the brand was.
J.Crew operates 182 retail stores, as well as 140 stores for its more youthful brand, Madewell. The retailer had reportedly been hoping to use an IPO to spin off Madewell, but apparently faced pushback from creditors about the idea.Reporting suggests that the company had $2.5 billion in sales over its last fiscal year, which ended on February 1. It joins a growing list of clothing retailers that have struggled to find a way to survive in the 21st-century economy.
J.C. Penney and Neiman Marcus were both struggling before the pandemic, but their issues have been heightened as a result of the economic fallout from the coronavirus. The first quarter saw the end of multiyear gross domestic product growth, as the economy shrank by 4.8 percent. Since COVID-19 became widespread, more than 30 million people have filed for unemployment benefits.
CNBC reports that, because of its strong brand, J. Crew and Madewell have a chance to survive this particular bout of economic hardship. Their e-commerce business allows for direct sales to consumers without relying on retail locations, thus circumventing social distancing guidelines.