It looks like another heritage retailer is down for the count.
Following months of speculation, Neiman Marcus (which also owns luxury temple Bergdorf Goodman) has officially filed for Chapter 11 bankruptcy, according to an official statement released by the company on Thursday. The Texas-based retailer had long been struggling financially, but the unprecedented impact of the Covid-19 pandemic expedited its decline. It is the largest American retailer to begin bankruptcy proceedings since the coronavirus turned the world economy on its ear.
Social media posts for both Neiman Marcus and Bergdorf Goodman explained the filing, pointing out the the brands will not be shuttering: “We have reached an agreement with lenders to undergo a financial restructuring that will substantially reduce our debt load and provide us access to a significant amount of financing to ensure business continuity via Chapter 11 proceedings. This is not a liquidation of our business.”
According to WWD, the company has lined up $675 million in debtor-in-possession financing along with a binding agreement to restructure with lenders holding two-thirds of its outstanding debt. Additionally, creditors have committed $750 million in financing to exit bankruptcy and continue evolving the brand.
The department store––which is already saddled with $5 billion in debt––was prompted to begin filing when it was unable to make a payment to a key bondholder as it shuttered stores in accordance with shelter in place orders. Money owed to many of the brands it stocks also represents a considerable problem. Neiman Marcus owes $6 million to Chanel, $3.2 million to Gucci’s USA operation and $2.3 million to Christian Louboutin, as just three examples. Though it expects to begin reopening stores in select regions soon, the retail environment may not be very welcoming, with a looming recession and no true end date in sight for the coronavirus outbreak.
But Neiman is far from the only department story to struggle, as many of its competitors are confronting similar challenges. Nordstrom is expected to shutter 16 stores permanently, and Saks Fifth Avenue recently laid off 507 workers based in New York while also missing its April mortgage payment. And, of course, Barneys was already felled before coronavirus became a global threat.
In a letter to shareholders detailing the agreement, Neiman Marcus chairman and CEO Geoffroy van Raemdonck said, “Prior to Covid-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth… We will emerge a far stronger company. In a world that is changing, we are uniquely positioned to give our brand partners access to our loyal luxury customers like no other company. We will deliver that through the strength of our associate relationships and digital solutions.”