The pandemic delivers a crippling blow to the retail industry as top retailers file for bankruptcy

The ongoing pandemic has wrecked a havoc on the worldwide retail industry. It began with US retail giant, J. Crew Group becoming the first national retailer of the United States to file for bankruptcy protection. The virus-forced wave of nationwide store closures led to this sad predicament. J. Crew Group portfolio consists of the brands like J. Crew and Madewell.

However, it is pertinent to note that if a company files for bankruptcy protection, it does not mean that the company must stop all its business proceedings. Bankruptcy is mainly used by the companies to shed their debts, other long-term borrowings, and liabilities which they cannot afford to pay off, while stopping all their un-profitable operational activities and closing the nonprofit making locations.

J. Crew Group has filed for their bankruptcy proceedings under Chapter 11 in the Federal Bankruptcy Court in the Eastern District of Virginia. The company has given a statement that they have come to an agreement with their lenders to convert their debt amount valued at $1.65 billions to fully funded equity.

Jan Singer, CEO of J. Crew Group said that they will continue their day to day operations, and they expect to emerge as a profitable company from this bankruptcy.

They have officially announced that their fast-growing denim brand, Madewell will be a part of their business. It is pertinent to note that initially Madewell wanted to part ways from their struggling parent company ,J. Crew Group. They wished to form their own Madewell Group by announcing an IPO and listing their stock on Nasdaq or the New York Stock Exchange. Madewell also stated to conduct their own road shows. Madewell eventually began to pitch itself to investors as a sustainability-geared brand who has a track record of attracting millennial customers. Madewell reached the $600 million sales figure mark in the fiscal year 2018 from $248 in fiscal year 2014. They currently operate 132 stores in US upscale malls and 37% of their sales come from online. While Madewell continued to grow, J. Crew started to lose more sales and continued to struggle. Madewell emerged as the crown jewel of the company.

Madewell eventually continued to be a part of this group and it was expected that the IPO from them would help the mother company to clear all its debts. Due to this virus-forced shutdown, Madewell’s plan to have an initial public offer got derailed and this turned out to be a major set back for the J. Crew Group and resulted in its widespread store closing. Madewell’s IPO could have been the saving grace for J. Crew Group in better times, but doing a IPO during this pandemic and that too a retail IPO would have been a futile effort.

According to a recent filing it was seen that J. Crew Group had about 14500 employees out of which 10,000 were on part-time basis.  The company had about 500 stores including their factory outlets.