Neiman Marcus Group is preparing to seek bankruptcy protection as soon as this week, news reports said Monday.
The Dallas luxury chain would be the first major U.S. department store operator to fall victim to the economic shutdown caused by the coronavirus pandemic. And other retailers may soon follow the same path.
Neiman Marcus had been forced to temporarily shut all 43 of its Neiman Marcus locations, roughly two dozen Last Call stores and its two Bergdorf Goodman stores in New York as health officials sought to contain the deadly virus.
Neiman Marcus is in the final stages of negotiating a loan with its creditors totaling hundreds of millions of dollars, sources told Reuters. The funds would sustain some of its operations during bankruptcy proceedings.
The company has also furloughed many of its roughly 14,000 employees. Neiman Marcus declined to comment.
Neiman Marcus’s borrowings total about $4.8 billion, according to credit-rating provider Standard & Poor’s. Some of this debt is the legacy of its $6 billion leveraged buyout in 2013 by its owners, the private-equity firm Ares Management and Canada Pension Plan Investment Board.
Department stores had been struggling prior to the coronavirus outbreak and the shutdown has made that bad situation much worse. J.C. Penney (JCP) - Get Report and Macy's (M) - Get Report are among the companies considered to be in financial difficulty.
More than 190,000 stores have temporarily closed, accounting for nearly half the U.S. retail square footage, Neil Saunders, managing director of GlobalData Retail, told the Associated Press in late March.
Earlier this month, Macy's said Chief Financial Officer Paula Price will leave the company less than a week after it was dropped from the S&P 500 benchmark.
In addition, the debt ratings of Macy's, Tapestry (TPR) - Get Report, parent of Coach, and Capri Holdings (CPRI) - Get Report, parent of Michael Kors, were reduced to junk status by Fitch Ratings, as shutdowns driven by the coronavirus pandemic dragged down the retailers' profits.
Retail sales for the month of March fell 8.7%, one of the sharpest monthly declines in history. The growth trend pre-March was at around 0.3%.