Neiman Marcus seems to be on a path to be the first U.S. department store chain to feel the effects of the coronavirus on its business. According to Reuters, The Neiman Marcus Group will reportedly declare bankruptcy this week after being forced to shut its stores due to the coronavirus pandemic. It joins several stores and restaurants to shutter due to the pandemic.
The virus forced the closure of 43 flagship locations, at least 20 Last Call stores and the company’s Bergdorf Goodman stores in New York. They also furloughed the majority of their 14,000 employees and moved to negotiate a loan with creditors to keep operations afloat while they move through bankruptcy.
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Wow. Dallas-based Neiman Marcus is preparing to file for bankruptcy. I’m sure they won’t be the last major company to do so.
— Erica Simon (@EricaOnABC13) April 19, 2020
According to Reuters, Neiman Marcus skipped payments in millions of dollars in debt a week prior, leaving only days before a default on some of the loans. The company’s total borrowings near $4.8 billion, with some of the debt lingering from a 2013 buyout by equity firms Ares Management Corp and Canada Pension Plan Investment Board.
The sources who revealed the bankruptcy news noted that the actual details of the filing are confidential, but the decision has been on their radar for a while. Several other stores have felt the strain from the pandemic too, including longtime consumer staples JCPenney, Macy’s, and Nordstrom. All are reportedly in a rush to secure financing to keep afloat whole stores are closed.
Another sore spot comes from claims made by bondholders in 2019 that the firm and its owners “robbed” them of value on its “luxury e-commerce site” MyTheresa. As Reuters describes, a lawsuit by creditors noted that the site business was moved “beyond the reach” of the creditors. Standards & Poor’s painted a grim picture for the company a week before the bankruptcy.
“In light of the significant headwinds stemming from the coronavirus pandemic and our expectation for a U.S. recession this year, we believe the company’s prospects for a turnaround are increasingly low,” the analysts wrote according to Reuters. “We continue to view its capital structure as unsustainable.”
S&P lowered the credit rating for the company into the “junk” definition and it set the bankruptcy into motion. Once the reported filing is complete, the company could see outside companies picking up assets and resources for cheap. One could also snatch up the company, with Saks Fifth Avenue owner Hudson’s Bay Co has explored a possible purchase in 2017 before dropping it ahead of privatizing its business.
Neiman Marcus started in Dallas, Texas back in 1907 and expanded around the country in the years to follow, acquiring Bergdorf Goodman in New York City and transforming into a high-end fashion chain for celebrities and the wealthy. Despite many years of success, the company and many other stores faced strain due to the rise of discount stores, online retail, and recession throughout the 2000s.
The coronavirus is merely the latest obstacle for many companies and economic avenues to navigate. For those already feeling the strain, it could be a death blow.
