Neiman Marcus to file for BANKRUPTCY after furloughing nearly 14,000 employees - Daily Mail

Neiman Marcus to file for BANKRUPTCY after furloughing nearly 14,000 employees and skipping interest payments worth millions– becoming the first major US department store to shutter amid the coronavirus pandemic

• Neiman Marcus Group is reportedly ready to file for bankruptcy 
• It would be the first major US department store to file bankruptcy amid the COVID-19 pandemic 
• Company is around $5billion in debt and skipped interest payments with creditors worth millions on Wednesday  
• Neiman Marcus previously closed as 43 stores because of lockdown orders
• 14,000 company staffers were furloughed across the country in March 
• Other stores like J.C. Penney, Best Buy and Macy's have struggled to stay open as consumer shopping heads online  
• Learn more about how to help people impacted by COVID

By Lauren Edmonds and Lauren Fruen For Dailymail.com

Published: 19:11 BST, 19 April 2020 | Updated: 20:29 BST, 19 April 2020

Neiman Marcus Group, one of the largest retailers in the United States, is reportedly ready to file bankruptcy amid the COVD-19 pandemic after defaulting millions in bond payments last week and furloughing 14,000 employees.  

Neiman Marcus would become the first major US department store to crumble amidst the economic set backs from the coronavirus outbreak. 

Reuters reported the company had few options after the coronavirus spurred lockdowns that shuttered non-essential businesses, including all 43 of their stores. 

This includes Last Call stores and its two New York City Bergdorf Goodman department stores. 

Neiman Marcus group is prepared to file for bankruptcy after financially struggling for years, Reuters reports

Neiman Marcus has struggled to stay afloat with brick-and-mortar stores as consumer shopping increasingly shifts online. 

The company is around $5billion in debt and is reportedly in the final stages of brokering a deal with its creditors, which could help keep some operations going during bankruptcy proceedings. 

The official bankrupt filing could happen in a matter of days, sources told Reuters. 

The bankruptcy on the horizon comes just days after Neiman Marcus Group defaulted on millions of dollars in interest payments to creditors on Wednesday. 

Neiman Marcus skipped interest payments to creditors on Wednesday that are reportedly in the millions of dollars 

WWD reported that Neiman Marcus had a five-day grace period on $72.9million in interest payments for bonds maturing in 2024.

An additional $5.7million in interest was also due Wednesday on bonds maturing in 2021, and the company has a 30-day grace period for that. 

Neiman Marcus has tried to push off potential bankruptcy by extending payment due dates with creditors, but doing so actually added to the company's interest expenses. 

Signs of trouble were visible as early as 2013, when the retailer was part of a $6billion leverage buyout by the Canada Pension Plan Investment Board and equity firm Ares Management Corp.  

In 2017, Neiman Marcus dropped its plans to go public and enter shares on the stock exchange as sales worsened. 

At the time Neiman Marcus CEO Geoffroy van Raemdonck blamed declining sales on low customer loyalty.

Neiman Marcus closed as 43 of its stores due to lockdown orders during the COVID-19 outbreak that ordered all non-essential businesses temporarily close

Pictured: New York City Fire Department (FDNY) and Emergency Medical Technicians (EMT) wearing personal protective equipment lift a man into an ambulance during an ongoing outbreak of the coronavirus disease in New York 

Last year, a trustee for Neiman Marcus Groups' bondholders sued the company over allegations that firm robbed investors of gaining value from its luxury e-commerce site, MyTheresea. 

Neiman Marcus denied those allegations and said their business dealings were proper. 

Pictured: Neiman Marcus CEO Geoffroy van Raemdonck

Once bankrupt, Neiman Marcus could attract the attention of interested buyers who want to purchase the Dallas-based company. 

Hudson’s Bay Co, owner of Saks Fifth Avenue, previously explored a bid for Neiman Marcus in 2017 but did not commit, Reuters reports. 

The bankruptcy announcement comes just weeks after the company furloughed a 'large portion' of 14,000 employees 

Van Raemdonck said in a statement that company stores would remain closed until April 30.

Van Raemdonck reveled he could waive his entire salary, as well as other executives taking 'significant' pay cut.

'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,' he said.   

Unemployment in the US has surged during the pandemic, with some 22 million people out of a job overall.

Other major chain stores like Macy's, J.C. Penney and Best Buy have taken massive financial blows that have not improved during the outbreak. 

March saw the biggest drop in retail sales in history: Consumer spending fell unprecedented 8.7%

U.S. retail sales plummeted a record 8.7 per cent in March as the viral outbreak forced an almost complete lockdown of commerce nationwide.

The unprecedented decline in sales far outpaced the previous record decline of 3.9 per cent that took place during the depths of the Great Recession in November 2008.

Figures show the hit to the economy is worse that had been projected; experts predicted an 8 per cent decline in monthly sales.

Chris Rupkey, chief financial economist at MUFG Union Bank, told CNBC: 'The economy is clearly in ruins here.' 

Auto sales dropped 25.6 per cent while clothing store sales collapsed, sliding 50.5%, the Commerce Department said Wednesday. Restaurants and bars reported a nearly 27% fall in revenue.

The U.S. has by far been the hardest-hit country, with more than 26,000 deaths and over 600,000 confirmed COVD-19 infections.  

As a result U.S. consumer confidence has plunged and the vast majority of Americans are hunkered down at home under shelter-in-place orders. 

Consumer spending drives two-thirds of the U.S. economy, and the record drop in retail sales is a symptom of the sharp recession that most economists believe the U.S. has already entered. 

Economists at JPMorgan Chase now forecast the U.S. economy will shrink by a record-shattering 40 per cent in the April-June quarter. 

'With clear signs of panic buying of necessities and the fact that lock downs were introduced only around the middle of the month means that far worse is to come in April and the second quarter more generally,' said Michael Pearce, an economist at Capital Economics, a consulting firm.

J.C. Penney skips a $12 million interest payment and faces bankruptcy after coronavirus forced its 850 department stores to close and retail takes huge hit  

J.C. Penney Co Inc on Wednesday said it is skipping a $12 million interest payment as the retail giant faces bankruptcy amid the coronavirus pandemic.  

The Plano, Texas-based company said it would not be making the April 15 payment in a filing Wednesday. They have a 30 day grace period before an 'event of default'. 

Nationwide lockdowns mean the chain was forced to temporarily shut its 850 department stores, upending its turnaround plans, according to people familiar with the matter. 

The JC Penney's headquarter on February 25 in New York City pictured before lockdowns. The company is exploring filing for bankruptcy protection after the coronavirus pandemic forced the U.S. retailer to temporarily shut its 850 department stores

J.C. Penney is said to be contemplating a bankruptcy filing as one way to rework its unsustainable finances and save money on looming debt payments, which include significant annual interest expenses. 

Concerns about prolonged store closures and customers remaining sparse even when outlets eventually reopen have also factored in to J.C. Penney's deliberations, some of the sources said.

The coronavirus outbreak has hammered traditional brick-and-mortar department store operators and other retailers that had to close their doors to customers to curb its spread.  

J.C. Penney also has a $105 million bond repayment due in June. 

The retailer must also contend with about $300 million in annual interest expenses, and faces more than $2 billion of debt maturing in 2023, according to regulatory filings. 

Best Buy said on Wednesday it would furlough about 51,000 employees.

The company said its sales dropped about 5 per cent in the first two months of the current quarter, as the electronics retailer kept its stores shut due to the coronavirus pandemic. 

It said that starting next week, some corporate employees would also participate in voluntary reduced work weeks and furloughs, while its top management and board would take a pay cut.

Best Buy Co Inc said on Wednesday it would furlough about 51,000 hourly U.S. store employees and that its sales dropped about 5% in the first two months of the current quarter, as the electronics retailer kept its stores shut due to the coronavirus pandemic

Best Buy, however, would retain about 82 per cent of its full-time store and field employees.  

J.C. Penney has not made any final decisions on how to address its strained finances, the sources said. 

Coronavirus hammers traditional brick-and-mortar department store

The coronavirus outbreak has hammered traditional brick-and-mortar department store operators and other retailers that had to close their doors to customers to curb its spread. 

They were already struggling as consumers shifted to online shopping, before the coronavirus infected more than half a million Americans, resulting in more than 23,000 deaths.

Macy's Inc, the largest U.S. department store operator by sales, has tapped advisers at investment bank Lazard Ltd and law firm Kirkland & Ellis LLP to explore options including new financing.

Last week, peer Nordstrom said it borrowed $600 million against its real estate. 

Neiman Marcus Group, another department store operator, is advancing bankruptcy preparations. 

Retail industry furloughs passed the one million mark in the United States last week as T.J. Maxx, Dick's Sporting Goods and Abercrombie & Fitch became the latest industry giants to announce cuts.

Dick's Sporting Goods said an unspecified 'significant' number of employees would be furloughed from April 12.

And off-price retailer TJX Companies Inc, the parent company of T.J. Maxx, Marshalls, HomeGoods and HomeSense, said on Tuesday it would furlough most of the employees at its stores and distribution centers.

TJX, which had about 286,000 employees as of February 1 according to its latest annual filing, will pay its staff until the week ending April 11.

The retailer is also considering asking creditors for breathing room through transactions that would rework debt outside of bankruptcy court proceedings, the sources added. There is also a possibility that J.C. Penney will be able to secure rescue financing, one of the sources said.

The sources spoke on condition of anonymity to discuss confidential deliberations. 

The 118-year old company has had to furlough some of its roughly 85,000 employees and slash spending.  Its online business is still running, though it does not contribute to the lion's share of the company's sales.  

Harley-Davidson Inc said on Wednesday it had temporarily laid off most of its global production employees and implemented salary cuts in a bid to lower costs as the coronavirus pandemic has hurt its business.

The announcement comes weeks after the motorcycle maker withdrew its earnings forecast for this year, saying pandemic-induced disruptions could dent its ability to supply and sell motorcycles. 

Best Buy said sales grew about 25 per cent during an 8-day period ended March 20, a day before the company announced its decision to switch to a curbside delivery model, as people shopped for work-from-home equipment, gaming-related products as well as products needed to freeze food.

The company added that domestic online sales surged over 250 per cent from a year earlier, with half the sales coming from customers who picked-up their products from stores.

However, store closures and decreased footfall have dented demand, and sales dropped 30 per cent from March 21 through April 11, Best Buy said.

'The situation remains very fluid and there is still a great deal of uncertainty, particularly as it relates to depth and duration of store closures and consumer confidence over time,' Chief Executive Officer Corie Barry said.

The company has already withdrawn all financial forecasts for fiscal 2021 and drawn down the full amount of its $1.25 billion revolving credit facility.

Best Buy had nearly 125,000 full-time, part-time and seasonal employees in the U.S., Canada and Mexico, at the end of fiscal 2020, according to an annual filing.

Shares of the company, which will report its results for the first quarter ending May 2, late next month, were down about 6% in early trading on Wednesday. 

J.C. Penney 'has been engaged in discussions with its lenders since mid-2019 to evaluate options to strengthen its balance sheet and maximize its financial flexibility, a process that has become even more important as our stores have also closed due to the pandemic,' a company spokeswoman said in a statement.

The pandemic 'has created unprecedented challenges,' she said, adding the company remains focused on its turnaround plan and looks forward to reopening stores.

J.C. Penney attempted unsuccessfully to persuade creditors earlier this year to restructure and push out due dates on portions of its nearly $4 billion of long-term debt without the need for bankruptcy proceedings. 

It hoped to buy time for Chief Executive Jill Soltau's turnaround plan to bear fruit, as it faced fierce competition from e-commerce firms as well as discount retailers such as the TJX Cos Inc's Marshalls and T.J. Maxx chains.

J.C. Penney had recently made some strides in its turnaround attempt, meeting or exceeding guidance on financial objectives for 2019 and improving sales at some stores. 

The company has been reducing inventory and refocusing on its core higher-margin business of selling mid-priced apparel to middle-class families.

The novel coronavirus outbreak threw a wrench in its plans.  

J.C. Penney in March drew down $1.25 billion from its revolving credit line. On March 31, it said it was also 'evaluating other financial options,' without providing further details.

But in another sign of J.C. Penney's financial woes, the company has added corporate turnaround experts at AlixPartners LLP who specialize in urgently addressing stressed finances to its roster of advisers, one of the sources said. Bloomberg News reported on that appointment on Monday.

J.C. Penney's revenue could plunge more than 25% this year, according to Fitch Ratings Inc. The credit ratings firm predicts that could cause J.C. Penney's earnings before interest, taxes, depreciation and amortization to turn 'materially negative' to the tune of $400 million in 2020.

J.C. Penney bonds due in 2023 were trading at roughly 43 cents on the dollar on Tuesday, according to Refinitiv Eikon data, indicating investor concerns about the company's ability to repay its debts.

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