As the coronavirus health and economic crisis drags on for much more time than anyone would have imagined, many important and long-loved companies have not been able to weather the storm.
At a time when stores have been closed for months, reopenings (where they are allowed) haven’t brought back the usual amount of clients and consumer habits have changed due to the confinement, many firms haven’t been able to stay afloat.
Whether it’s because of the shift towards online shopping which not every company has successfully accomplished, or because consumers have spent more money on house repairs and less on clothes, bankruptcy has been the only option left for many retailers.
J.C. Penney is closing more stores in bankruptcy
After years of sales declines and two months of disruption due to the COVID-19 health crisis, J.C.Penny filed for Chapter 11 bankruptcy protection on May 15. Now new stores have been added to the list of permanent closures.
The Texas-based retailer announced June 4 that 154 stores would shut down in its first wave of closings but ended up removing several locations and ended up with 136 closing stores. A second wave of started on July 3 at 13 additional stores.
It said it plans to close about 29% of its 846 stores or 242 locations in bankruptcy and hopes to use the process to shed debt and remain in business.
Now J.C. Penney has added a pair of New York stores, the Brooklyn store in Kings Plaza, and the location in the Manhattan Mall to its list, bringing the current closings list to 150 locations.
Because of the coronavirus pandemic, the store liquidation sales will have fewer shoppers allowed into stores because of social distancing guidelines.
Stores across the department store chain are currently operating under reduced hours from 11 a.m. to 7 p.m. Monday through Saturday and 11 a.m. to 6 p.m. Sunday.
On Wednesdays and Fridays, stores have designated an hour, from 11 a.m. to noon, for at-risk shoppers including senior citizens, expectant mothers, and those with underlying health concerns, according to the company website.
Jeans and bankruptcy
As staying at home and video calls change people's consumption habits, an American classic has been forgotten and has left a number of businesses bankrupt, in the wake of falling sales in recent months.
During confinement, consumers forgot about jeans and changed their clothing habits. At the end of 2019, the denim industry was estimated to grow by more than $ 14 billion by 2024, but coronavirus is affecting all brands of "jeans". Denim pants have been replaced by more comfortable, stretchy, and cheaper fabrics, notes a Washington Post report.
When most office workers thought that wearing a pair of jeans was the most comfortable option, during confinement workers opted to wear shorts and baggy pants to pair with casual shirts and blouses during video calls, and the fashion industry, in general, saw shopping trends and drastic changes for consumers.
According to the Post, companies such as Gap registered an increase in sales of men's joggers, leggings and tracksuits, or sports pants.
The True Religion, Lucky Brand, and G-Star RAW brands have filed for bankruptcy since early June. Joe’s Jeans and Hudson Jeans filed for Chapter 11 protection in May while iconic Levi’s saw a 62% drop in revenue in the second quarter and announced a cut of 700 workers, 15 percent of its corporate workforce.
With a new surge of COVID-19 cases nationwide, there is no saying when this trend could end and what the future of many other jean companies may be.
Lord & Taylor closes all its stores after almost 200 years in business
The first department store in the United States, established in 1826, filed for bankruptcy and officially announced it is going out of business. Its 38 branches and its website began clearance sales.
After a 194-year career in the industry, parent company Le Tote filed for bankruptcy.
"While we are still entertaining various opportunities, we believe it is prudent to simultaneously put the remainder of the stores into liquidation to maximize the value of inventory for the estate while pursuing options for the company's brands," Ed Kremer, Lord & Taylor's chief restructuring officer said in a statement, according to CNN.
Englishman Samuel Lord and his wife's cousin, George Washington Taylor, opened the first store in lower Manhattan in 1826 and the company thrived in the years following World War II, led by Dorothy Shaver, the first woman to lead a major retailer.
JCPenney, Neiman Marcus, and Sears are department stores that have also declared bankruptcy during the coronavirus pandemic, along with Brooks Brothers, New York & Company, Sur La Table, Pier 1 Imports, and Lucky Brand. Some of them have been rescued from bankruptcy by Authentic brands.
However, while the retail industry suffers, online shopping has declined in recent months, favoring Amazon and some firms that have managed to increase their sales through their websites.
How could troubled long-loved brands be saved from bankruptcy?
At a time when backtracking on reopenings and new closures are causing many troubled famous retailers to close for good, some brands stand a chance of being rescued from bankruptcy.
Authentic Brands, the apparel licensing that saved Barney’s from liquidation last year and rescued Brooks Brothers and Lucky Brand from bankruptcy this month, may be the best chance many retailers have to survive amidst the present crisis. ’ The Company’s CEO Jamie Salter has said he is sitting on about $1 billion in cash and on the hunt to buy more troubled retailers.
Lots of retailers were already facing economic distress and struggling to compete with Amazon before the coronavirus pandemic hit, but the crisis accelerated the 44 retail bankruptcies and more than 6,000 store closures already announced this year.
This situation creates an opportunity for a company like Authentic Brands Group, which was generating $15 billion in annual retail revenue before Covid-19 started.
But Salter isn’t looking to buy just anything. He said he’s looking for struggling businesses with good real estate and international recognition.
Salter’s company and the biggest mall owner in America Simon Property Group have come together in a joint-venture called Sparc, which is salvaging Lucky Brand's stores and website, and whose bid to acquire Brooks Brothers from bankruptcy and save at least 125 stores was just approved.
Authentic Brands has already saved Barneys New York, Forever 21, Aeropostale, Nautica, and Nine West, many of the stores that are present at any suburban shopping mall.
“The mall is still important to building brand value on a global basis,” Salter said.
And where Simon Property brings expertise in retail real estate and negotiating leases, Authentic Brands Group brings its extensive background in licensing, merchandising, and marketing, Sparc CEO Marc Miller added.
Consumers should expect some changes coming to their beloved brands that are acquired by Sparc for Miller and Salter have plans to mix things up and diversify.