J. Crew was struggling before the pandemic wreaked havoc on retail across the globe. It appears bankruptcy is now imminent.
According to the New York Times, J. Crew will likely file for Chapter 11 bankruptcy protection as soon as Monday. The company had been struggling for years, with consumers turning toward less preppy, more sustainable, and/or cheaper retailers. Things were beginning to look up for them in 2020, with planned product pivots and a public IPO offering for Madewell, a younger spinoff brand. That IPO deal fell through at the end of March, and though the company declined to comment, it looks like the coronavirus pandemic and accompanying economic decline really screwed things up.
Per the Times:
J. Crew was carrying a debt burden of $1.7 billion based on a leveraged buyout in 2011 by two private-equity firms — TPG Capital and Leonard Green & Partners — even before the coronavirus brought clothing sales to a near-halt in the 182 stores, 140 Madewells and 170 outlets it was running as of early March. And it had struggled to adapt to changing consumer tastes.
This is bad news for J. Crew and its fans, but it’s also bad news for pretty much every clothing brand, especially those still relying on brick-and-mortar sales. Not long before the pandemic, Barneys shuttered all its stores and Forever 21 filed for bankruptcy. Long before the pandemic, retail was on the decline, malls were dying, and department stores like Macy’s were starting to close en masse.
The future of retail does not look promising, as the Times points out:
“The companies going into bankruptcy, for the most part, were companies that were struggling before Covid — we have not seen true Covid-only bankruptcies,” said James Van Horn, a partner at the law firm Barnes & Thornburg and a specialist in retail bankruptcy.
However, he added, “depending on how the current situation continues, that may change.”
So, potentially, no more J. Crew for Michelle Obama or Meghan Markle, and fewer jobs left for J. Crew’s currently furloughed retail employees. It’s bad news for everyone.