J.Crew Has Officially Filed for Bankruptcy
Preppy fashion brand J.Crew is the latest retailer to file for Chapter 11 bankruptcy. The move comes after several days of speculation about the clothing-maker's plans, following unconfirmed rumors of an upcoming filing.
J.Crew, which is part of the Chinos Holding Inc. umbrella, was operating 182 brick and mortar locations as well as 140 Madewell stores (the younger, more casual brand they launched in 2006) and 170 J.Crew Factory stores (their discount-focussed outlet operation) prior to the novel coronavirus outbreak, which forced their physical retail operations to shut down as states around the nation implemented quarantine measures. However, COVID-19 wasn't the sole factor in the brand's decision to file.
As of February 1, 2020, the company listed their outstanding long-term debt at almost $1.7 billion, according to Bloomberg, due in large part to the leveraged buyout of the brand carried out by TPG Capital LP and Leonard Green & Partners LP in 2011. The debt burden was compounded by several years of declining sales, accusations of decreased quality, and the 2017 departure of president and creative director Jenna Lyons, who served as a longtime public face for the brand.
The apparel category itself has also been seeing an overall downturn in sales in recent years, thanks partly to consumers pivoting to resale and rental operations like The RealReal and Rent the Runway. Even before the coronavirus forced many stores to shut down, the Department of Commerce reported the slowest clothing sales numbers since March 2009. Since states began enforcing social distancing measures in mid-March, Census Bureau data suggests apparel sales are now down more than 50%.
It's not currently clear what the future will hold for J.Crew and its sub-brands. Prior to the official filing announcement, they had reportedly been working for some time to secure $400 million in financing to fund operations through the bankruptcy proceedings, which suggests that they had planned to continue as usual during a debt restructuring.
In a statement on Monday, J.Crew Group confirmed that they had received that $400 million. CEO Jan Singer also said:
“Throughout this process, we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary COVID-19-related circumstances. As we look to reopen our stores as quickly and safely as possible, this comprehensive financial restructuring should enable our business and brands to thrive for years to come.”
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