J.Crew Files for Bankruptcy

On Monday, the J.Crew Group joined the bandwagon of companies that have recently filed for bankruptcy due to the coronavirus pandemic. The company has since become the first national US retailer to file for bankruptcy.

A company representative, on behalf of J.Crew, said on Monday that it already filed to begin a Chapter 11 protection in the federal bankruptcy court in Virginia. The company also mentioned that it had come to an agreement with its creditors to convert into equity about $1.65 billion of debt.

While bankruptcy proceedings go on, the company intends to remain in business and hopefully recover from its financial downturn as a profitable company. Many companies use bankruptcy as a way of laying off debt and other liabilities they cannot afford. However, it comes at a price. Filing bankruptcy doesn’t necessarily mean that a company would go out of business.

In these times, however, companies that file bankruptcy may have no other choice than to do so. The coronavirus pandemic has affected the whole economy in such a way that businesses are not the only ones in need of financial federal government assistance but whole industries and states as well.

J.Crew’s bankruptcy filing may have opened the door to other retail stores that are currently threatened by low business operations due to the Covid-19 pandemic. Neiman Marcus and J.C. Penny have been widely reported to be low on cash with high possibilities of filing for bankruptcy as well.

The whole industry has had it quite rough over the years as industry giants like Walmart and Amazon have dominated the entire industry. Many retailers have managed to stay operational with intense competition. With the economy greatly impacted by the pandemic, there are fears that many retailers may go out of business and it may take a while before they recover. According to Gordon Brothers, a liquidation firm, about 25,000 stores could remain permanently closed for the rest of the year. This would be as a result of very low demand in non-essential items such as clothing, sports gear, toys, etc.

As regards this issue, director of retail studies at Columbia Business School said, “There is no question that all types of retailers are going to have to close hundreds of stores that don’t have any kind of future on the other side of the pandemic.”

“Malls have faced an enormous amount of breakage over the last few years: Closing anchors, disappearing chains, specialty stores like Forever 21 and Gymboree filing for bankruptcy. This trend is only going to accelerate during this crisis, and it’s going to accelerate explosively,” he said.

UBS analysts said in March that “retail store closures are likely to accelerate in a post-COVID-19 world,” on the grounds that the gap between major retailers and struggling chains will widen.

Prior to now, J.Crew Group had about 14,500 employees, and almost 500 operational stores including the J.Crew, J.Crew factory stores, and Madewell. Last year, company sales rose 2% to $2.5 billion. The Group had also planned an IPO for its Madewell brand, but the coronavirus pandemic has put the plan on hold.