The clothing chain lost its chance for a turnaround due to the pandemic.
Fashion retail chain J. Crew’s parent company, J. Crew Group, has been forced to file for chapter 11 bankruptcy protection. The company has been in a bad state for a while now, having accrued a massive debt after a buyout deal back in 2011. The company had been hoping for a turnaround in 2020, but the COVID-19 pandemic quickly squashed those hopes as shoppers refrain from leaving home for all but the essentials.
J. Crew, as well as J. Crew Group’s other major brand, denim company Madewell, currently have around 321 retail locations between them, as well as 170 factory stores. Before the pandemic began in earnest, the retailers had about 13,000 employees, but due to store closures, those numbers are in constant flux.
About $1.65 billion of J. Crew Group’s debt will be converted into equity, according to a deal between J. Crew Group and its lenders. They are hoping to keep both J. Crew and Madewell running after the procedings are finished, but permanent closure of storefronts is a very real possibility.
According to Michael Nicholson, president of J. Crew Group’s parent company, Chinos Holdings, “If certain accommodations with landlords are not achieved, the Debtors likely will reject certain burdensome leases and close the related stores.”
J. Crew is the first major retail outlet to suffer chapter 11 as a result of the COVID-19 pandemic. Temporary storefront closures have wreaked havoc on businesses on all ends of the spectrum, though the difference between larger retailers and smaller chains is that, due to expenses incurred during closure, many smaller chains will likely continue to lose money and business even when the pandemic has slowed down.