Neiman Marcus on Thursday became the first major department store to file for bankruptcy as the economic fallout from the coronavirus pandemic hammers the retail industry.
Neiman announced in a statement that it has entered into a “restructuring support agreement” with a “significant majority of its creditors” to “substantially reduce debt and position the company for long-term growth.” The statement did not include details about any store closures.
To implement the agreement, the company said it “commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division” and secured financing of $675 million from creditors to “enable business continuity.”
The company laid the blame for its financial state squarely on the coronavirus, claiming that it had been on a profitable path prior to the pandemic’s spread.
“Prior to COVID-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth. We have grown our unrivaled luxury customer base, expanded our industry-leading customer relationships, achieved higher omni-channel penetration, and made meaningful strides in our transformation to become the preeminent luxury customer platform,” said Neiman Marcus CEO Geoffroy van Raemdonck.
“However, like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business,” he added. “The binding agreement from our creditors gives us additional liquidity to operate the business during the pandemic and the financial flexibility to accelerate our transformation. We will emerge a far stronger company.”
The bankruptcy filing does not necessarily mean the firm will go out of business — companies often use the tool to relieve themselves of debts and other liabilities they can no longer afford as they shutter unprofitable locations.
Neiman’s bankruptcy is emblematic of the broad pain the coronavirus is inflicting on the retail and clothing industries. Sales of clothing and accessories dropped by more than half in March, and retail sales fell by 9 percent that month according to the Commerce Department, the largest drop on record.
Neiman agreed to a leveraged buyout worth $6 billion with Ares Management and the Canada Pension Plan Investment Board in 2013 and had to drop plans to go public in 2017 over poor stock showings. It had nearly $5 billion in debt, according to its last public filing a year ago.
