Fashion retailer J. Crew’s parent company filed for Chapter 11 bankruptcy protection Monday after the coronavirus pandemic undermined its turnaround plans.
J. Crew was on weak footing before the pandemic began, having racked up an unsustainable amount of debt from a private-equity buyout deal in 2011. COVID-19 plunged the company deeper into crisis mode as it temporarily closed its stores.
As of Monday, the company had 181 J. Crew retail stores, 140 Madewell locations and 170 factory stores in addition to its websites. The retailer had about 13,000 employees before the pandemic began.
The company, which leases all of its stores, disclosed in a court filing that it had hired a real estate consultancy and liquidator to help it evaluate its leases and negotiate rent relief. Permanent store closings are possible.
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“If certain accommodations with landlords are not achieved, the Debtors likely will reject certain burdensome leases and close the related stores,” Michael Nicholson, president of J. Crew parent company Chinos Holdings, said in a court filing.
With too much debt, the company was not well-positioned to deal with the same challenges that its competitors are facing, including declining mall foot traffic, digital threats and fast-fashion alternatives.
J. Crew has the sixth-most debt among distressed retailers, according to Moody’s Investor Service.
The company’s plan to spin off its promising women’s apparel business Madewell in 2020 was supposed to help the company pay down some of its debt.
But that deal apparently faltered when the coronavirus pandemic forced J. Crew and many other retailers to temporarily close its stores.
J. Crew said Monday that it had canceled plans to spin off Madewell.
Instead, the company said it has reached a deal to convert $1.65 billion in debt to equity.
“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,” J.Crew Group CEO Jan Singer said in a statement.
Some states have lifted or eased restrictions linked to coronavirus, prompting some businesses to reopen. Macy’s revealed last week it would open 68 stores on Monday in states that have eased restrictions.
J. Crew traces its roots to 1983, when it began selling clothes. The company went public in 2006, acquired Madewell in 2006 and expanded internationally in 2011.