A sign is seen at the window of a closed J.Crew store near Rockefeller Plaza on May 4, 2020 in New York City. ANGELA WEISS/AFP via Getty Images
The great coronavirus shutdown was supposed to be temporary. The idea was to shelter-in-place, pause the economy, use government funding to patch financial losses, and pick right up when it was safe to go outside. But just the pandemic has exposed and exacerbated gaping inequalities in people’s personal finances, many businesses that were already struggling before the coronavirus hit American shores are now facing permanent damage — or closing altogether.
Since most states initiated shelter-in-place orders in late March, a string of iconic retailers have been forced to furlough employees, default on mortgage payments, deeply discount merchandise, all desperate measures undertaken to save money and make it through to the other side of the pandemic. Not every company will make it. Here’s a list of the most endangered retail businesses, which will be updated as we
J.Crew Group
On Monday, J. Crew Group, which operates J.Crew and Madewell brands, filed for Chapter 11 bankruptcy protection after failing to reach a deal with potential buyers. The retailer is currently seeking $400 million in financing to fund normal operation of its 322 stores during bankruptcy. The company has been burdened by $1.7 billion in debt due to a leveraged buyout by private equity firms in 2011.
The preppy apparel chain had intended to take Madewell, its more profitable brand, public and use the funds to pay down some of its $1.7 billion debt, per The Wall Street Journal. But the deal fell through in March as the financial markets took a bad hit from the coronavirus.
Brooks Brothers
J.Crew’s fellow posh brand Brook Brothers is also on the brink of bankruptcy. Struggling with the $600 million debt sitting on its balance sheet, the fabled menswear retailer is desperately looking for a buyer, Bloomberg reported on Friday.
Victoria’s Secret
Victoria’s Secret recently found itself in an awkward position after its private equity buyer, Sycamore Partners, said it was no longer interested in the company. Sycamore claimed that it was entitled to the right to terminate the deal because Victoria’s Secret’s parent company, L Brands, had violated original transaction terms by failing to pay April rent.
Neiman Marcus
Neiman Marcus has been in talks with lenders about filing Chapter 11 since late March, according to Bloomberg. The luxury department store, already struggling to stay relevant in the e-commerce era before the pandemic, is dealing with a mountainous $4.3 billion debt and missed millions of dollars in loan payments in April. Like J. Crew, the retailer also was saddled with debt due to private equity buyouts.
Saks Fifth Avenue
The iconic New York City department store missed April mortgage payments and is currently offering deep discounts site-wide in a bid to attract designer shoppers.
Last week, Saks Fifth Avenue’s parent company, Hudson’s Bay Company, said it will have to lay off 507 retail workers in New York City. Hudson’s Bay’s other department store, Lord & Taylor, closed its flagship store in New York last year and sold itself to a startup for a paltry $100 million. In February, Hudson Bay was taken private by its chairman Richard Baker and a team of investors.
JCPenney
Mid-scale department stores are only doing marginally better. Similar to Neiman Marcus, JCPenney is in talks with lenders about imminent bankruptcy protection to ease its $4.3 billion debt load. The retailer is reportedly seeking $1 billion in bankruptcy financing, per MarketWatch. The company has been in turmoil for the last decade and last summer moved to find ways to restructure as its share price dipped below $1.
Sears
Sears already filed for bankruptcy protection and closed more than 140 stores in 2018. Now, it’s on the verge of going through a second, and final, bankruptcy, according to CNN Business, as the pandemic continues to wreck its once-iconic business.
Sears has temporarily closed all its namesake stores and furloughed most of corporate employees since the coronavirus outbreak.
Macy’s
Macy’s, while forced into store closures and massive layoffs just like its peers, might actually be one of the few department stores that can emerge from the crisis without an embarrassing Chapter 11 or sale.
But first, it needs to raise about $5 billion in debt issuance to fund operation through the pandemic, CNBC reported last month.
On Monday, Macy’s re-opened 68 stores as several states loosened quarantine measures. Extremely bullish analysts predict that Macy’s share price, which has fallen 70 percent year to date, could jump as much as 30 percent after the pandemic, based on the company’s stock trajectory during the 2008 Financial Crisis.
