Neiman Marcus Group has pulled the trigger.
After weeks of bankruptcy speculation, the debt-saddled luxury retailer today filed for Chapter 11 protection. Neiman Marcus said it has secured $675 million in financing from creditors to continue operations during the bankruptcy process. Mytheresa, the luxury e-commerce platform owned by NMG, is not included in the Chapter 11 restructuring.
In a statement, Geoffroy van Raemdonck, chairman and CEO of Neiman Marcus Group, blamed the coronavirus pandemic for its latest woes.
“Prior to COVID-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth. We have grown our unrivaled luxury customer base, expanded our industry-leading customer relationships, achieved higher omnichannel penetration, and made meaningful strides in our transformation to become the preeminent luxury customer platform,” he said in a release. “However, like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business.”
Since mid-March, the coronavirus pandemic has forced the department store chain to close all doors across its Neiman Marcus, Last Call and Bergdorf Goodman banners, putting a dent in sales. What’s more, a “large portion” of the retailer’s workforce of roughly 14,000 persons has either been furloughed or received a pay cut. CEO Geoffroy van Raemdonck has forfeited his salary, while executives reporting directly to him waived a “significant amount” of their base pay.
But the coronavirus is just one of several hurdles Neiman Marcus has faced in recent years. In its quest for profitability, the company has struggled in the face of digital disruption and reduced foot traffic. In August 2018, the retailer announced a four-year transformation plan that has entailed investing in omnichannel and supply chain technology, as well as embracing the growing resale trend through a minority stake in consignment company Fashionphile. Last year, the chain was able to rework some of its debt and avoid filing for bankruptcy. It has also looked into strategies for raising capital, including the potential sale or IPO of its MyTheresa e-commerce site.
In March, Neiman Marcus said 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 announced it would close the majority of its Last Call stores, leading to 750 slashed jobs. The company said the cuts did not represent a workforce reduction because Last Call workers may be transferred to other positions within Neiman Marcus Group, and those who are laid off will be eligible for severance and outplacement services.