Neiman Marcus has become the first department store and second major retailer to file for bankruptcy amid the coronavirus pandemic, reports The Associated Press. The company's decision to file follows in the footsteps of fellow retail chain J. Crew, which filed for bankruptcy on Monday.
"Prior to COVID-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth. However, like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business," said CEO Geoffroy van Raemdonck in a statement.
The luxury goods sector is facing a 35 percent decline in sales this year, which is much worse than the single-digit decrease from the 2008 recession.
Neiman Marcus expects to be out of bankruptcy by the fall. According to a spokeswoman from the company, they are not currently planning any major store closings. The retail chain operates 43 luxury department stores throughout the country, with its base of operations located in Dallas, Texas.
As a non-essential retailer, Neiman Marcus closed its stores in mid-March to help aid in the prevention of spreading the virus. Since then, they have reopened a few stores for curbside pick-up in states that have begun to lift their stay-at-home orders.
"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. Neiman Marcus said that the restructuring will eliminate $4 billion of its roughly $5 billion in debt," says the article.
They were forced to file for Chapter 11 bankruptcy protection not long after when the company "failed to make a payment to a key bondholder."
Department stores have been struggling to stay afloat for years now as consumer shopping habits evolve. Most customers prefer to do their shopping at places like T.J. Maxx or through online retailers such as Amazon.
J.C. Penney is another department store that experts believe could join the ranks of Neiman Marcus and J. Crew. The department store chain is currently trying to recover from a 2013 reinvention plan that resulted in the store not repaying its $12 million debt.
On social media, many people first started to catch on to the possibility of the retailer's impending "restructuring" phase when they saw many high-end products go on sale. Several Twitter users wrote that they were happy to take advantage of the deals while stuck at home.
Economic experts believe that it won't be long before many more stores follow in the footsteps of Neiman Marcus and J. Crew by filing for Chapter 11.