Neiman Marcus on Thursday became the first major department store group 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 shadows gather over chains like Lord & Taylor and J.C. Penney.
At the end of March the coronavirus pandemic temporarily forced the closure of all 43 Neiman Marcus stores, as well as its two Bergdorf Goodman stores and Last Call outlets, all but stopping sales and crushing revenue. But while that may have been the immediate cause of Neiman’s filing, its problems had been building for years. The company took on an untenable amount of debt as part of two leveraged buyouts by private-equity firms, and Neiman’s did not respond quickly enough to changes in shopping habits. Together, those developments left the group in a precarious position even before the virus hit.
The pandemic has been disastrous for the already weakened retail industry. Last month, sales of clothing and accessories fell by more than half. Those numbers are only expected to get worse in April, because many stores were open for at least some of March (e-commerce, a relatively small contributor to total sales for most store chains, is not enough to save them). Earlier this week, J. Crew filed for bankruptcy. Retailers have furloughed employees, slashed corporate salaries and hoarded cash in a desperate attempt to make it to the end of the shutdown. But there is widespread acknowledgment that Neiman Marcus is not likely to be the last retailer to face the brink.
Still, neither Neiman Marcus — nor Bergdorf Goodman — is likely to disappear completely.
William Susman, managing director at Threadstone Advisors, said he expected the retailer to use bankruptcy to shed some of its leases and reduce its physical footprint, a situation that could make it more attractive to a potential buyer.
“Neiman Marcus has a bad balance sheet, but it’s still a luxury brand,” Mr. Susman said. “They still have a reason to exist.”
Neiman Marcus was founded in Dallas in 1907, just in time to become a magnet for new oil money. It built its reputation on an unabashed embrace of the trappings of luxury — and the dreams of those who aspired to own them, or experience them for a moment. It became famous for its extravagant Christmas catalog, which over the years offered items like an only-at-Neiman’s authentic Guinness pub-in-your-home for $250,000 and a $20 million submarine.
The company’s mastermind was Stanley Marcus, son of one of the founders — Herbert Marcus. (The other founders were Herbert’s sister, Carrie Marcus Neiman and Carrie’s husband, A. L. Neiman). Under his guidance Neiman Marcus became the first department store to hold a weekly fashion show for customers. On the occasion of the Texas Centennial Fair the store held a special extravaganza it called “100 Years of Texas Fashions” and Edna Woolman Chase, the editor of Vogue and a guest, said: “I dreamed all my life of the perfect store for women. Then I saw Neiman Marcus, and my dream had come true.”
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