Neiman Marcus Files for Bankruptcy; No Plans to Liquidate
Neiman Marcus Group on Thursday became the first major department store chain to file for bankruptcy protection during the coronavirus pandemic. It’s a stunning fall that follows the collapse of Barneys New York late last year and comes as bankruptcy rumors persist for chains like Lord & Taylor and J.C. Penney. In a statement, the company said it received $675 million in financing from creditors to keep running the business, as well as $750 million it hopes will help it get out of bankruptcy by “early fall.” The creditors will become majority owners of the company, and Neiman Marcus expects to eliminate $4 billion in debt.
Total Retail's Take: Earlier this week, J.Crew announced a bankruptcy filing, and today Neiman Marcus followed suit with its own filing. Unfortunately, the tenuous state of many traditional brick-and-mortar retailers was dealt a significant blow by the coronavirus pandemic. That was very much the case for Neiman Marcus, according to Kelly Lynch, retail solutions manager at ActiveViam, a data science provider from top retailers.
"Among all legacy retailers, Neiman Marcus possibly stood to lose the most once the COVID-19 crisis broke out. Plagued by a heavy debt load and increased competition from other e-commerce players within the luxury space, Neiman Marcus’s struggles have long been documented. However, given the brand still carries significant cache within the luxury space in particular, it will be interesting to see how the company emerges on the other side of this crisis. In order to avoid mistakes of the past, Neiman Marcus needs to dramatically rethink its process for decision making and analytics, and start implementing more advanced technology solutions to optimize its most coveted asset — inventory. Purchase quantities, assortments and pricing-related decisions will be critical for Neiman Marcus to emerge in a stronger position for the long run."
As noted, Neiman Marcus is not planning to liquidate, and there's still a chance for a triumphant return, according to Joseph Acosta, partner at the international law firm Dorsey & Whitney.
"The Neiman Marcus name isn't going away any time soon. But, the only thing that saves retailers like Neiman Marcus is the strong presence of their legacy and name in the marketplace, giving the company an opportunity to be marketable and conduct substantial business in the future and eventually become profitable again.
“Neiman Marcus can utilize the tools in a Chapter 11 process to shed less profitable locations and deleverage its balance sheet of billions of dollars in debt, through a form of recapitalization, leaving it a much stronger company when it emerges from bankruptcy."