World Footwear

Companies

J.Crew files for bankruptcy protection

May 5, 2020 United States
J.Crew files for bankruptcy protection
The multi-brand, multi-channel, specialty fashion retailer J. Crew became the first major US retailer to file for bankruptcy protection in the middle of the coronavirus outbreak
Bloomberg calls it the "first of many casualties" of the Covid-19 pandemic. Other media channels are listing the possible names to join J. Crew, with The Washington Post saying that Neiman Marcus and J.C. Penney, which being low on cash, might be considering a similar action.

What makes this case worrying is the fact that many retail chains in the US might be suffering from the combination of stressful factors resulting in a recipe for serious trouble: heavy debt structures; closure of stores given the Covid-19 pandemic and a retail shopping framework which was already under significant pressure which will - all indicates - intensify in the coming months.


Why can this be a Wider Problem?

Liquidation firm Gordon Brothers is estimating that 25 000 stores might permanently close this year. If such estimates turn to be effective, a chain effect might be triggered. As big retail chains start to go bankrupt and close, this will negatively impact surrounding smaller stores which benefit from the location. This basically means that smaller retailers, taking advantage from the heavier shopping traffic to big retailers, will face less visits to stores and less revenue generated. According to real estate services firm Green Street Advisors, roughly one-half of the country’s mall-based department stores could close by the end of 2021. Another daunting figure. However, one that might not be out of context, and given the scenario where retail was already under significant pressure, the Covid-19 crisis might accelerate the closure of low-performing closures. This will have an impact on several fronts: landlords, suppliers and workers.

J. Crew: not a New Problem

The mall-based chain goes back to the end of the 1940s when Popular Merchandise, a catalogue-based purveyor of affordable women’s apparel first appeared. J. Crew was later established in the 1980s and has opened its first store, in Manhattan, in 1989. J. Crew locations in other states were opened and by the early 1990s the company was registering 200 million US dollars in annual revenue. The brand grew and received recognition through the country, with celebrities being frequently seen with the brands products. Analysts point out the company’s 2011 sale as the turning point, with issues in the quality of products and the new collections. On top of that added competition from new retailers and the increasing popularity of the online also contributed to the aggravation of the situation. By 2014, sales were on the downwards trend and the company posted a 607.8 million US dollars loss in a quarter. After Jenna Lyons, Creative Director left the company in 2017, two years later Chief Executive Mickey Drexler stepped down as well. But the difficulties continued with decreasing sales quarter over quarter and net loss figures getting larger. Now, with the Covid-19 pandemic the company did not resist the pressure and filed for bankruptcy protection.

Now, J. Crew said it expects to continue operating during reorganization and underlined that customers should not expect any immediate changes. Lenders of the retail chain have agreed to convert 1.65 billion US dollars of debt into equity. “This agreement with our lenders represents a critical milestone in the ongoing process to transform our business with the goal of driving long-term, sustainable growth for J. Crew and further enhancing Madewell’s growth momentum”, commented Chief Executive Jan Singer.

In its bankruptcy filing, J. Crew’s parent company, Chinos Holdings, said it owes between 1 billion US dollars and 10 billion US dollars. This should impact more than 25 000 creditors. The same source estimates assets of 1 billion US dollars to 10 billion US dollars. 


Note: a big-box store is a physically large retail establishment, usually part of a chain of stores. The store may sell general dry goods (general merchandise retailer), or may be limited to a particular specialty or may also sell groceries, in which case some countries (mostly in Europe) use the term hypermarket, whereas in the U.S. there is no specific term for the format, which both Target and Walmart offer in most branches

Image credits: yournorthcounty.com

Related Events

  • Feb
    25
    Feb 25-Feb 26, 2024 | Manchester, New Hampshire, United States

    Boston Shoe Travelers

  • Feb
    27
    Feb 27-Feb 28, 2024 | Indiana, United States

    The Indy Show

  • Mar
    2
    Mar 2-Mar 5, 2024 | Portland, United States

    The Northwest Market

  • Mar
    3
    Mar 3-Mar 5, 2024 | Chicago, United States

    Chicago Collective Women's Edition

Related Organizations

  • FIT - Fashion Institute of Technology

    FIT - Fashion Institute of Technology

    United States
  • FFANY - Fashion Footwear Association of New York

    FFANY - Fashion Footwear Association of New York

    United States
  • Two Ten Footwear Foundation

    Two Ten Footwear Foundation

    United States
  • USRA - United Shoe Retailers

    USRA - United Shoe Retailers

    United States