J.Crew Becomes First National Retailer To Seek Bankruptcy Protection Since COVID-19 Outbreak

(AmericanPoliticalDaily.Com)- The coronavirus pandemic has dealt a serious blow to many businesses, especially in the retail industry.
On Monday, one large national retailer filed bankruptcy as a result.
J.Crew Group became the first major national retailer in the United States to file for bankruptcy protection after they were forced to close a number of their stores due to the pandemic. It has filed Chapter 11 proceedings in federal court in the Eastern District of Virginia.
The company did say, though, that it expects to remain in business and emerge profitable from bankruptcy. The company has a deal in place when some of its lenders to convert roughly $1.65 billion of their debt into equity in the company.
J.Crew started back in 1983, but didn’t open its first store until 1989, relying solely on catalogues before then. The company was bought in 2011 for $3 billion, and then began growing rapidly to open new stores. Since that time, it nearly doubled the number of stores it had.
It also accumulated a lot of debt along the way. In 2010, before the deal was announced, it had roughly $50 million of long-term debt. As of February 1 of this year, it had $1.7 billion.
In total, the company had roughly 14,500 employees about a year ago as of the latest company filing, with about 10,000 of those being part-time. They had nearly 500 stores split between their J.Crew, Madewell and J.Crew factory brands.
While the company’s sales grew 2% overall last year, to $2.5 billion total, it was a lopsided split between brands. J.Crew sales actually fell 1% while Madewell grew 10%.
That’s something that Reshmi Basu, who works for Debtwire as a retail bankruptcy expert, said was supposed to vault the company forward. He said:
“Madewell was supposed to be the saving grace. This is an asset that lenders were fighting over for years. But no one wants to do an IPO right now, especially a retail IPO. COVID-19 upturned everything.”
In fact, a lot of the company’s financials were showing the possibility for a nice turnaround before the coronavirus hit. While the company had net losses of $78.8 million in its most recent fiscal year, that was a big improvement over the $120 million it lost the year before.
And its adjusted earnings before factoring in interest and taxes were $250.7 million, almost double the $112.8 million from the year before. Once the pandemic hit, though, stores were forced to close and plans got derailed almost overnight.
Still, J.Crew’s CEO, Jan Singer, believes the company has bright things ahead of it.
“We will continue all day-to-day operations,” she said in a statement.
“As we look to re-open our stores as quickly and safely as possible, this comprehensive financial restructuring should enable our business and brands to thrive for years to come.”
J.Crew may be the first national retailer to be forced to seek bankruptcy protection as a result of COVID-19, but it’s unfortunately probably not the last.