Neiman Marcus on Thursday became the second major US retailer this week to file for bankruptcy protection as coronavirus shutdowns exacerbate an already bad outlook for struggling chains.
The Dallas-based luxury retailer filed voluntary Chapter 11 proceedings in US Bankruptcy Court in Houston following a submission on Monday from US clothing retailer J. Crew.
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Neiman Marcus said it reached agreement with a majority of creditors to restructure the business and debt as it moves to gradually reopen stores following COVID-19 shutdowns.
The company secured financing of $675 million to carry out operations during bankruptcy proceedings. Neiman Marcus expects to emerge from the process in early Fall 2020 with about $4 billion less debt, it said.
The agreement with creditors “gives us additional liquidity to operate the business during the pandemic and the financial flexibility to accelerate our transformation,” said chief executive Geoffrey van Raemdonck.
“We will emerge a far stronger company.”
Neiman March and J. Crew had been seen as highly vulnerable to bankruptcy given high debt loads. The COVID-19 crisis has battered most brick-and-mortar stores that don’t provide essential goods like groceries and medicine.
The J. Crew bankruptcy is “the first of many” in the coming period, S&P said in a report this week.
“We believe the economic shutdown and lingering social distancing behaviors will trigger a broad shakeout of retail as the industry will be forced to meaningfully reduce its physical footprint and rapidly evolve to the post-pandemic consumer.”
Neil Saunders of GlobalData Retail, said in a note that high debt had left Neiman Marcus on “borrowed time” prior to the COVID-19 crisis, but that the company’s ability to reach an agreement with creditors showed “investors still see a future for the chain.”
The chain’s stores are mostly in “strong” malls and it has loyal base of shoppers, Saunders said, but he added that it must do more to win young shoppers and bolster its e-commerce offerings.
The company stands a chance, but “it will take a lot of creativity and imagination to drive them through,” Saunders said.
In the meantime, Neiman is navigating a patchwork of conditions in its markets, having reopened 10 stories for curbside pickup and two stores by appointment only.
The company has extended temporary closures of other stores through May 31.