Neiman Marcus on Thursday has filed for Chapter 11 bankruptcy protection, casting a shadow over other retailers as they remain shuttered during the CCP virus pandemic.
The firm announced in a statement (pdf) that it has entered into a “restructuring support agreement” with a “significant majority of its creditors” to reduce its debt and position the firm for growth. It did not include details about any potential permanent store closures.
To carry out the agreement, Neiman Marcus said it “commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division” and secured $675 million from creditors to “enable business continuity.”
The move was done in “supporting continued operations during the COVID-19 pandemic and beyond,” according to the Dallas, Texas-based luxury retailer. The firm blamed the lack of revenue on the CCP (Chinese Communist Party) virus pandemic, saying it was on a profitable path before it unfolded.
“Prior to COVID-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth. We have grown our unrivaled luxury customer base, expanded our industry-leading customer relationships, achieved higher omni-channel penetration, and made meaningful strides in our transformation to become the preeminent luxury customer platform,” Neiman Marcus CEO Geoffroy van Raemdonck said in the statement.
“However, like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business,” he added. “The binding agreement from our creditors gives us additional liquidity to operate the business during the pandemic and the financial flexibility to accelerate our transformation. We will emerge a far stronger company.”
Neiman Marcus isn’t the first major department store group to file for bankruptcy during the pandemic. It follows a bankruptcy filing by J.Crew, which became the first major retailer to reorganize, but experts have said there will be more to come as businesses stay closed and millions of people remain out of work.
Late last year, Barneys New York, another luxury retailer, shut down, while other chains such as Lord & Taylor and J.C. Penney face losses.
The Chapter 11 filing does not mean that Neiman Marcus will go out of business completely. Firms often use the legal tool to relieve themselves of debt and other liabilities.
William Susman, managing director at Threadstone Advisors, told the New York Times on Thursday that he believes Neiman Marcus will shed some of its leases and reduce its brick-and-mortar footprint.
“Neiman Marcus has a bad balance sheet, but it’s still a luxury brand,” he told the paper. “They still have a reason to exist.”