Neiman Marcus filed for Chapter 11 bankruptcy protection on Thursday in Texas, following multiple reports in recent weeks that the Dallas-based luxury retailer was discussing the possibility of doing so.
According to court documents, the company said it expected to emerge from bankruptcy in early fall, the Dallas Morning News reports.
Neiman Marcus is one of many department stores losing sales after being forced to shut down a wide network of brick-and-mortar locations due to the Covid-19 outbreak. It has temporary closed 43 Neiman Marcus stores, 24 Last Call outlets and the two Bergdorf Goodmans in New York.
But even without those costly closures, 2020 was going to be a challenging year for the company. It was already struggling with mounting debt and slowing growth due to competition from e-tailers like Net-a-Porter; credit analysts last year declared that it could likely file for bankruptcy in 2020 due to said debt. And according to Reuters, Neiman Marcus missed millions of dollars of debt repayments in mid-April. It's total current debt is estimated at $4.8 billion.
Its longstanding debt problem was not helped by its 2013 sale to Ares Management and the Canada Pension Plan Investment Board, which was a leveraged buyout, meaning debt was taken on as part of the transaction. About a year ago, Neiman Marcus negotiated a deal to extend its debt maturities and avoid defaulting on loans, but it wasn't enough.
Neiman Marcus likely won't be the last retailer that the current pandemic pushes to the brink. Even as they try to weather store closures by focusing on e-commerce, cancelling or reducing orders and finding new ways to connect with consumers, those who were already on thin ice before the Covid-19 pandemic will have an especially tough time digging themselves out of it. (J.Crew filed for bankruptcy on Monday.) And the recession that will ensue even once we're physically allowed to shop again won't help.