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J.Crew becomes the first retailer in the US to file for bankruptcy during COVID-19 crisis

2020/05/10



In 1947, Mitchell Cinader and Saul Charles founded Popular Merchandise, Inc., a store which did business as Popular Club Plan and sold low-priced women's clothing marketed through in-home demonstrations. Throughout the mid-1980s, sales from catalog operations grew rapidly. "Growth was explosive—25 to 30 percent a year," Cinader later recollected in The New York Times. Annual sales grew from $3 million to more than $100 million over five years. In 1985, the "Clifford & Wills" brand was launched, selling women's clothing that was more affordable than the Popular Merchandise line. In 1987, two executives left the company to start their own catalog, Tweeds.

 

J.Crew, the upmarket preppy retailer that once was the king of America’s mall brands, is preparing to file for bankruptcy protection according to multiple media sources. The struggling retailer is one of several high-profile U.S. chains including Neiman Marcus and J.C. Penney, that are on the verge of unraveling during the coronavirus pandemic.

 

The news was first disclosed by CNBC, who said “J. Crew is preparing for a bankruptcy filing that could come this weekend.” The revelation is neither shocking or unexpected, as the company slowly unraveled over the last few years and is now allegedly seeking 400 million dollars to continue operations.

 

After news broke that the J.Crew Group would be filing for bankruptcy protection, the American retailer has announced that it began its Chapter 11 proceedings in federal bankruptcy court in Virginia. The company, which includes the brands J.Crew and Madewell, is the first retailer in the U.S. to file for bankruptcy protection since the COVID-19 pandemic forced retailers across the country to close brick-and-mortar stores for at least six weeks.

 

J.Crew said that it has reached an agreement with its lenders to restructure its debt and deleverage its balance sheet. Its lenders will convert about 1.65 billion dollars of the company's debt into equity, which J.Crew hopes will help it position its brands for long-term success.

 

"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," said Jan Singer, the J.Crew Group's CEO, said in a statement.

 

"Throughout this process, we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary COVID-19-related circumstances. As we look to reopen 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 shares plan for profitable growth

 

The company has confirmed that Madewell will remain part of J.Crew Group, as several had wondered whether the company might decide to sell the brand off.

 

J.Crew said it will continue to focus on its e-commerce businesses for both brands, which now represents at least 50 percent of total revenues. Since the company closed its stores in March, it has been holding sales through its e-commerce sites, such as limited-time sitewide sales or discounts on clearance items.

 

E-commerce will continue to operate as normal while the company waits for public health restrictions to lift before reopening its brick-and-mortar stores.

 

J. Crew’s halcyon days are long over

 

None of the creative and leadership team who led the company during its heyday – designers Jenna Lyons, Frank Muytjens and brand architect Mickey Drexler – are still with the group. All exited in 2017 after the brand consistently posted declining sales figures over several seasons. Following Lyons departure, Somsack Sikhounmuong was announced as the company’s new creative director, only to leave some five months later. Despite some promising quarters, neither sales or popularity returned the glorious levels of its halcyon days.

 

A once thriving company that steadfastly delivered an accessible version of American high fashion, the clothes and the imagery that once made them covetable became boring. “Somehow drained of spirit,” wrote Vanity Fair back in 2017. “And the headlines surrounding the company have been even worse. Since 2014, J. Crew has been steadily clacking back down the tracks it once ascended, shedding money and influence, not to mention executives.”

 

After multiple attempts at self-preservation, restructuring, debt-offloading and new leadership appointments J. Crew was already struggling financially before the pandemic hit, most notably from competition by online giants like Amazon. Whether or not it will successfully secure financing to remain operational, J. Crew is unlikely to recapture the magic it once held.

 

For more information, please pay attention to Fashion Trade Show.

 

Source: fashionunited
Image: courtesy of Pandora
https://fashionunited.com/news/fashion/j-crew-becomes-the-first-retailer-to-file-for-bankruptcy-during-covid-19-crisis/2020050433387
By: Robyn Turk


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