With millions of Americans out of work and its stores temporarily closed, J.Crew is heading for bankruptcy. It could be the first of several retailers to crumble during the coronavirus pandemic under financial troubles that predate the crisis.
In announcing its bankruptcy filing on Monday, J.Crew said it hopes the move will help it get its finances in order while the company keeps running, though for now under COVID-19 restrictions. The company operates 181 J.Crew stores, 140 Madewell stores and 170 J.Crew Factory stores.
"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," Jan Singer, CEO of J.Crew Group, said in a statement.
The coronavirus pandemic has left stores and malls shut for weeks, and many retailers have struggled to keep up with their bills. That's been particularly painful for companies already in financial distress, like J.Crew, J.C. Penney, Neiman Marcus, Sears and Brooks Brothers. Several are now considering bankruptcies or sales, looking to trim back their sprawling networks of stores.
Sales of clothing plummeted more than 50% last month, with many workers furloughed or laid off.
Now malls and stores are slowly starting to reopen in some parts of the country, but it's unclear how quickly Americans will go back to spending on clothes and accessories given staggering unemployment. Gap, for example, has warned that some of its stores simply may never reopen.
J.Crew had narrowly avoided bankruptcy in recent years as its debt ballooned to nearly $1.7 billion, growing since the leveraged buyout by private-equity firms took it private in 2011.
The preppy retailer, launched in 1947 and branded J.Crew in 1983, had a renaissance of sorts during the late 2000s to early 2010s. The retailer, known for straight silhouettes and preppy styles without the luxury price tag, gained praise as a favorite of former first lady Michelle Obama.
But soon, it began its long and slow downturn. More competitors grew loyal fan bases online. J.Crew began facing criticism of its quality. The executives credited for the creative vision that led to the revival left in a wave.
J.Crew recently planned to pay down some of that debt through an infusion of cash from spinning off its more casual and youthful subsidiary brand Madewell. But that public listing was suspended earlier this spring, and now appears untenable during the market upheaval of the coronavirus.
MARY LOUISE KELLY, HOST:
A staple of the suburban mall filed for bankruptcy today. J. Crew could be first among several retailers to implode during the coronavirus pandemic from financial troubles that pre-date the health crisis. NPR's Alina Selyukh reports.
ALINA SELYUKH, BYLINE: The history of J. Crew goes back over 70 years as a catalogue company whose sport-inspired name was a direct response to Ralph Lauren's polo with the initial J. to look cool. But there's a moment in recent memory when, by all measures, the brand hit the big time.
(SOUNDBITE OF TV SHOW, "THE TONIGHT SHOW WITH JAY LENO")
MICHELLE OBAMA: This is a J. Crew ensemble.
JAY LENO: Really? Wow.
SELYUKH: Michelle Obama, about to become fashion trendsetter first lady, touting J. Crew's sensible pricing on "The Tonight Show With Jay Leno."
(SOUNDBITE OF TV SHOW, "THE TONIGHT SHOW WITH JAY LENO")
LENO: I have no idea what that means but OK.
OBAMA: We - ladies, we know J. Crew.
SELYUKH: That was late 2008, a sort of a renaissance for the preppy brand with its straight silhouettes, nautical stripes, cashmere sweaters and crew neck cardigans. But this week, the company became the first retail casualty during the coronavirus pandemic, which has left stores and malls around the country shut for weeks. Clothing brands are especially struggling, which is particularly painful for those already in financial distress like J.C. Penney, Brooks Brothers, Neiman Marcus or J. Crew.
SUCHARITA KODALI: This accelerated the inevitable.
SELYUKH: Sucharita Kodali is a retail analyst at Forrester. She says J. Crew has been skating on the edge of bankruptcy for a while. The company's story is a familiar one in retail. Private equity firms bought J. Crew about a decade ago and weighed it down with debt. Soon after, the brand began to miss trends and slowly lose cachet in a growing crowd of online competitors.
KODALI: You think that you have the ability to set trends, and you think that anything that you create, people will buy.
SELYUKH: That worked for J. Crew for a while. For those epic years of success, J. Crew was run by a man known as the merchant prince, Mickey Drexler. Alongside him was influential fashion designer Jenna Lyons, who took mass market J. Crew to the New York Fashion Week.
(SOUNDBITE OF ARCHIVED RECORDING)
JENNA LYONS: If you're already familiar with J. Crew, you know that we like to pair sparkle with tweed.
SELYUKH: But then came complaints that J. Crew was becoming too runway, too expensive. The company became a revolving door of executives. It totally missed the huge athleisure trend. Its online business wasn't keeping up.
KODALI: It was selling a lot of the same types of merchandise - you know, the ballet slippers and the bejeweled sweaters, you know, and the big chunky necklaces, which are cute but they were a little off-trend by, you know, the last few years.
SELYUKH: J. Crew's shining star was Madewell, the more youthful and casual brand. The company wanted to spin it off and use that cash to pay down some of the debt. But that public listing was suspended in March right as the pandemic hit. Now J. Crew hopes to reopen its stores soon as it gets its finances in order using bankruptcy, an option on the table for a growing list of big retailers during the coronavirus crisis.
Alina Selyukh, NPR News. Transcript provided by NPR, Copyright NPR.