Neiman Marcus Group, a well-known luxury department store operator, is reportedly on the verge of filing for bankruptcy in the coming week. This comes as a result of the severe economic toll inflicted by the coronavirus outbreak, making Neiman Marcus the first major US department store operator to succumb to the challenges posed by the pandemic. The company, already burdened with debt, was forced to temporarily shut down all 43 of its Neiman Marcus locations, as well as its Last Call and Bergdorf Goodman stores in New York.

In an effort to sustain its operations while going through the bankruptcy proceedings, Neiman Marcus is currently in the final stages of negotiating a loan with its creditors, which could potentially be worth hundreds of millions of dollars. Additionally, the company has been forced to furlough a significant portion of its workforce, which consists of around 14,000 employees. To further compound their financial troubles, Neiman Marcus recently missed several debt payments, including one that only gave them a few days to avoid default. Overall, the company finds itself with a staggering $4.8 billion in borrowings.

The overwhelming debt burden on Neiman Marcus can be attributed in part to its leveraged buyout in 2013, which totaled $6 billion and was orchestrated by private equity firm Ares Management Corp and Canada Pension Plan Investment Board. Similar struggles have been faced by other department store operators like Macy’s and Nordstrom due to forced store closures. These companies are currently exploring various avenues to secure new financing, including leveraging their real estate assets. In fact, J.C. Penney is reportedly contemplating a bankruptcy filing as a means of addressing their unstable financial position and reducing their debt payments.

Neiman Marcus has been desperately trying to avoid bankruptcy for a number of years now. In 2019, the company resorted to pushing out due dates on their financial obligations as part of a restructuring deal with certain creditors. However, this ultimately resulted in increased interest expenses. Furthermore, Neiman Marcus faced a lawsuit from bondholders who accused the company of transferring valuable assets beyond the reach of creditors during a corporate reshuffling. The company, however, denies any misconduct.

Industry analysts remain skeptical about Neiman Marcus’ chances of making a successful turnaround, particularly in light of the devastating economic impact caused by the coronavirus pandemic. Rating agency Standard & Poor’s has downgraded the company’s credit rating and believes its current capital structure is inherently unstable. Once the bankruptcy filing is complete, there is a possibility of potential buyers expressing interest in acquiring the company or its assets at a discounted price. Hudson’s Bay Company, which currently owns Saks Fifth Avenue, had considered making a bid for Neiman Marcus back in 2017, but ultimately decided against it. It remains uncertain whether they would now be interested in making a renewed offer.

Having a rich history in the retail industry, Neiman Marcus first opened its doors in Dallas, Texas in 1907. Over the years, the company expanded its footprint across the United States and acquired the iconic Bergdorf Goodman store in New York City in 1972. Like many traditional department store operators, Neiman Marcus has wrestled with intense competition from discount retailers as well as the rise of online shopping. The company has also had to contend with luxury e-commerce firms like Yoox Net-A-Porter Group and Farfetch. Unfortunately, the emergence of the coronavirus outbreak has pushed Neiman Marcus to the brink, as their online operations alone cannot compensate for the significant loss of sales experienced by their physical stores.

In conclusion, Neiman Marcus is facing a dire financial situation as a result of the economic impact of the coronavirus outbreak. The company’s impending bankruptcy filing marks a significant development in the retail industry, particularly for department store operators. While Neiman Marcus strives to navigate through this challenging period, it remains uncertain what the future holds for the luxury retailer.

Useful Links:
1. New York Times
2. The Wall Street Journal