J. Crew has become the first national retailer to file for bankruptcy protection due to the coronavirus pandemic, according to the Washington Post.
They explain, “The 73-year-old New York-based retailer was struggling to stay relevant long before the outbreak forced it to temporarily shutter all 492 of its J. Crew and Madewell stores. Analysts say a series of missteps, in both fashion and finance, have left the onetime mall darling with slipping sales and nearly $2 billion in debt.”
While going through Chapter 11, the clothing chain and its lenders will convert its $1.65 billion in debt to equity. They will also be allowed to continue to operate.
In a statement, J. Crew’s chief executive Jan Singer explained, “This agreement with our lenders represents a critical milestone in the ongoing process to transform our business with the goal of driving long-term, sustainable growth for J. Crew and further enhancing Madewell’s growth momentum.” She added, “Throughout this process, we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary Covid-19-related circumstances.”
Paula Rosenblum, managing partner at Retail Systems Research in Miami, explains how filling for Chapter 11 will benefit the chain. She says, “J. Crew has been on the bubble for years. The best thing about Chapter 11 is you get to get rid of stores that you don’t need or want anymore. It’s the only way to break a lease.”