As coronavirus-induced store closures continue, Neiman Marcus is the latest retailer to make major moves to protect its balance sheet.
The Dallas-based luxury retailer is making the decision to furlough or slash pay for a “large portion” of its organization. The company has extended store closures through at least April 30 across the Neiman, Last Call and Bergdorf Goodman banners. It plans to reassess whether furloughs continue as the end of April approaches.
CEO Geoffroy van Raemdonck has decided to forfeit 100% of his salary during these furloughs. Executives who report directly to him are also waiving a “significant amount of their salary.”
“Neiman Marcus Group, like so many other businesses, has been negatively affected by the COVID-19 pandemic. This is a truly unprecedented time,” van Raemdonck said. “While these are the most difficult decisions to make, our focus is on ensuring our business is protected over the long term so we can continue serving our associates and customers.”
Last week, a report from Bloomberg indicated that Neiman Marcus is mulling whether to file for Chapter 11 protection. The report said the company has begun engaging in preliminary talks with lenders about a bankruptcy loan to keep it going as a recovery plan is worked out.
“We are evaluating all courses of action to preserve our financial strength so that we may continue serving our customers and associates, and being a great partner to luxury brands globally,” a spokesperson told FN at the time.
Amid digital disruption and reduced foot traffic, Neiman Marcus has faced numerous struggles in its quest for profitability. In August 2018, the company announced a four-year transformation plan that has entailed investing in ominichannel and supply chain technology, and embracing the growing resale trend by investing in consignment company Fashionphile.
However, Neiman Marcus has a massive debt load of over $4 billion, much of which dates to its 2013 private equity buyout. The retailer has looked into strategies for raising capital, including the potential sale or IPO of its MyTheresa e-commerce site.
As it undergoes debt restructuring, Neiman Marcus this month revealed it would wind down its Last Call discount business, a perhaps surprising move since experts have considered off-price to be one of the retail sector’s few current bright spots. The department store chain said it would close the majority of its Last Call stores, leading to 750 job cuts. The company said the cuts do not represent a workforce reduction because Last Call workers may be transferred to other positions within the Neiman Marcus group, and those who are laid off will be eligible for severance and outplacement services.
The retailer also slashed nearly 100 roles at its Dallas headquarters in November; there were mainly vacant positions, but some layoffs were also included.