Lord & Taylor Files for Bankruptcy, Plus More Retailers Facing Financial Stress amid Coronavirus
The coronavirus crisis is hitting the brick-and-mortar retail industry hard
As retail stores across the country slowly reopen or adapt to curbside pickup due to the novel coronavirus (COVID-19) pandemic, many iconic fashion retailers are facing an unprecedented decline in sales, with some filing for bankruptcy as a result.
Many of these fashion retailers, which were already struggling before the crisis, have been especially hard-hit as customers remain focused on buying essential items. And with social distancing measures expected to continue throughout certain areas of the country as we enter summer, it's likely that stores will continue to suffer and face uncertain futures.
“Then there is the trend of more shopping going online and retailers having way too many physical stores. Now with COVID-19 in the mix, it is really going to accelerate the trends with more store closures and ultimate failures," David Berliner, partner at accounting firm BDO, told Forbes. “Bottom line, I expect there will be fewer retail chains surviving post-COVID-19 and the surviving chains, particularly apparel and other mall-based specialty stores, will reduce the number of brick & mortar store locations."
Below, a list of the fashion retailers that have filed for bankruptcy as a result the financial downfall from the coronavirus crisis.
Lord & Taylor and Le Tote
Less than one year after Hudson's Bay Company sold the nearly 200-year-old department store to Le Tote, an online clothing rental service, both Lord & Taylor and Le Tote filed for Chapter 11 bankruptcy protection in the Eastern District of Virginia on August 2.
Le Tote, a San Francisco-based startup founded in 2012, paid $100 million in cash in 2019 to acquire the oldest American department store's brand and inventory, online operations and control of its 38 retail locations. However, according to The New York Times, Hudson's Bay Company agreed to still own all Lord & Taylor real estate and cover the property rent for three years.
The company was hit hard a few months after the sale at the start of the coronavirus pandemic which required the temporary shutdown of all Lord & Taylor retail stores. Although Lord & Taylor and Le Tote continued operating online throughout the pandemic, the company's mounting debt obligations led to the bankruptcy filing. According to Women's Wear Daily, Le Tote owes Liquidity Capital II, $8.5 million in bank debt. The bankruptcy filing states that Le Tote has between $100 million to $500 million in both assets and debts.
In a statement to customers shared on its website, Lord & Taylor announced its plan to seek a new owner.
"Today we announced our search for a new owner who believes in our legacy and values. Part of our announcement also includes filing for Chapter 11 protection to overcome the unprecedented strain the COVID-19 pandemic has placed on our business," the brand's statement said.
"We will continue to offer superior service and value in store and online during the Chapter 11 case. There are no immediate changes to our ecommerce site or forms of payment, including Lord + Taylor gift cards and LT Rewards house cards," Lord & Taylor's statement continued. "Thank you for your support now more than ever."
After insiders hinted to Reuters that the luxury fashion chain was planning to seek bankruptcy protection in late April, the company officially announced its decision to file on May 7, according to NBC News.
The chain filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division and secured $675 million in financing. The company operates 43 Neiman Marcus stores, 22 Last Call stores and two Bergdorf Goodman stores and has a borrowings total of about $4.8 billion, according to credit rating firm Standard & Poor’s. Some of that debt is left over from its $6 billion buyout in 2013 by its owners, private equity firm Ares Management Corp and Canada Pension Plan Investment Board (CPPIB).
In an official statement, chairman and CEO Geoffroy van Raemdonck said, “Like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business."
“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.”
Bergdorf Goodman addressed the news in a post shared on its Instagram, noting that "this is not a liquidation of our business."
"We are resilient, and we will continue to bring you the luxury fashion, service and relationships you cannot find anywhere else," the statement said.
J.Crew Group lenders agreed to convert the company's estimated $1.65 billion of debt into stock. According to several reports, the company (which operates the denim-driven label Madewell, in addition to its namesake brand) will continue e-commerce sales and hopes to reopen stores when social distancing restrictions are lifted.
"We will continue all day-to-day operations," J.Crew Group CEO Jan Singer said in a statement, according to CNN.
J.Crew declined PEOPLE's request for comment.
On April 13 the designer denim brand filed for Chapter 11 bankruptcy protection for the second time in three years, according to a report from Forbes.
“While the debtors would have preferred to wait-out the current instabilities of the financial markets and retail industry generally, they simply could not afford to do so,” according to court documents obtained by Forbes, which noted that store closures caused by coronavirus accelerated the company's problems.
True Religion previously filed for bankruptcy in 2017 and exited in four months after it invested in its e-commerce business, closed stores and slashed its more than $350 million of debt.
Lucky Brand Dungarees filed for Chapter 11 protection on July 3, after struggling to transition from brick-and-mortar stores to online platforms amid the novel coronavirus, according to the Wall Street Journal. The outlet reports that the Los Angeles-based brand has experienced “month-over-month decline in revenue of about 50%” as retailers across the country were forced to close due to the pandemic.
Lucky Brand owes $182 million to lenders and $79 million to merchandise vendors, according to the bankruptcy filing obtained by the WSJ, and plans to close at least 13 of its more than 200 North American stores.
The SPARC Group LLC (the operating company of Aéropostale and Nautica) has proposed a deal to buy Lucky Brand, according to court documents obtained by the WSJ.
"The COVID-19 pandemic has severely impacted sales across all channels,” interim CEO and executive chairman Matthew A. Kaness said in a statement, according to USA Today. “While we are optimistic about the reopening of stores and our customers' return, the business has yet to recover fully.”
After more than 200 years in business, the iconic retailer, which was founded in 1818, filed for Chapter 11 bankruptcy court protection from creditors while it continues searching for a buyer.
"Over the past year, Brooks Brothers’ board, leadership team, and financial and legal advisors have been evaluating various strategic options to position the company for future success, including a potential sale of the business,” a spokesperson for the retailer said in a statement obtained by CNBC. “During this strategic review, COVID-19 became immensely disruptive and took a toll on our business.”
The Brooks Brothers spokesperson went on to say that the company is currently looking to identify the "right owner, or owners, to lead our iconic Brooks Brothers brand into the future."
“It is critical that any potential buyer aligns with our core values, culture, and ambitions. Further details on the sale process will be made available in the coming days," the spokesperson continued.
Known for dressing 40 of the 45 U.S. presidents, the brand, which considers itself "the country's oldest clothing retailer," has offered timeless, preppy designs for generations. In 1900, Brooks Brothers launched its signature Original Polo Button-Down Oxford that has since become “the most imitated item in fashion history," the brand says.
Currently, Brooks Brothers has more than 500 stores worldwide and employs 4,025 people, CNBC reports. In April, the retailer closed 51 of its retail locations amid temporary nationwide retail closures due to the coronavirus pandemic.
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