Neiman Marcus Group, Inc. is reportedly mulling a decision to file for bankruptcy.
According to a Bloomberg report, the Dallas-based luxury retailer has engaged in preliminary talks with lenders about a bankruptcy loan to keep the company going as it seeks to work out a recovery plan. If such a strategy goes as planned, the Chapter 11 filing would allow Neiman Marcus to stay in business while trimming its heavy debt load and eliminating underperforming outposts, the report said.
A Neiman Marcus representative told FN that the company is “evaluating all courses of action” as it attempts to stay in business amid the increasingly challenging economic environment spurred by the coronavirus pandemic.
“Most businesses today are facing some degree of disruption from the unprecedented global economic environment resulting from the COVID-19 pandemic. 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 from the company told FN. “Our priority has been and will always be to ensure stability for our associates and brand partners.”
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Alongside other department store chains, including Nordstrom and Macy’s, Neiman Marcus announced last week that it would temporarily shutter stores across the Neiman, Last Call and Bergdorf Goodman banners due to the coronavirus outbreak. The decision to close doors for now is likely to cause a dip in same-store sales and thus result in decreased fiscal-year revenues for the debt-strapped retailer.
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 cuts of about 750 jobs. The company said the cuts do not represent a workforce reduction because Last Call workers may be transferred to other positions within Neiman Marcus, and those who are laid off will be eligible for severance and outplacement services. The retailer slashed nearly 100 roles at its Dallas headquarters in November, including mostly vacant positions as well as some layoffs.