J.Crew is heading for bankruptcy with millions of Americans out of jobs and its stores being partially closed. It may be the first of many retailers to fail under the financial difficulties that precede the crisis during the coronavirus pandemic.
In announcing Monday’s bankruptcy filing, J.Crew said it hopes the move would help it keep its finances in order while the company continues to operate, albeit under COVID-19 restrictions for now. 181 J.Crew stores, 140 Madewell stores, and 170 J.Crew Factory stores are owned by the company.
“As we prepare to reopen our stores as quickly and safely as possible, this comprehensive financial restructuring will allow our company and brands to prosper for years to come,” said Jan Singer, CEO of the J.Crew Group, in a statement.
The coronavirus pandemic has been closing down shops and malls for weeks and many retailers struggled to keep up with their bills. For businesses already in financial trouble, such as J.Crew, J.C. Penney, Neiman Marcus, Sears, and Brooks Brothers, that’s been especially difficult. Several are now considering bankruptcies or sales, trying to rectify their vast store networks.
Last month, clothing prices fell by over 50 percent, with many employees being furloughed or laid off.
Now, in some parts of the world, malls and shops are gradually starting to reopen, but it’s unclear how easily Americans can go back to shopping on clothes and accessories despite staggering unemployment. Gap, for instance, has warned that some of its stores might simply never reopen.
In recent years, J.Crew had narrowly avoided bankruptcy as its debt ballooned to nearly $1.7 billion, increasing as private-equity firms’ leveraged buyout took it private in 2011.
The preppy retailer, which was launched in 1947 and renamed J.Crew in 1983, had a revival of sorts in the late 2000s and early 2010s. The store, renowned without the luxury price tag for simple silhouettes and preppy looks, received acclaim as a favorite of former first lady Michelle Obama.
But soon, it began its long, slow downturn. More competitors became faithful online fan bases. J.Crew has begun to face criticism of its price. The executives praised the artistic vision that left in a boat, contributing to the revival.
J.Crew has recently decided to pay off some of the debt by infusing cash from selling off its more relaxed and youthful subsidiary Madewell company. But the public listing had been suspended earlier this year, and now seems untenable amid the coronavirus’ market upheaval.