J.Crew files for bankruptcy as coronavirus hammers retail sector

J.Crew has filed for chapter 11 bankruptcy amid the coronavirus outbreak. Yahoo Finance’s Emily McCormick joins Seana Smith to discuss what this means for the retail sector.

Video Transcript

SEANA SMITH: I want to get to a big story that we are watching in retail. And that is J. Crew filing for bankruptcy. Now, of course, this comes amid the coronavirus pandemic, forcing a wave of store closures. We have "Yahoo Finance's" Emily McCormick, who's been closely tracking this story. And Emily, when we take a look at so many these retailers that are in trouble, J. Crew becoming the first real national retailer to file for bankruptcy amidst this coronavirus pandemic.

EMILY MCCORMICK: Absolutely, Seana. So this is something that we really did see coming for a while now. J. Crew has had issues, particularly with its balance sheet, that far predated the coronavirus outbreak. If we think about it, J. Crew had had at $1.7 billion in debt since its 2011 leveraged buyout with a couple of private equity firms. So this company had been highly levered for almost a decade now. And just now filing for chapter 11 bankruptcy, according to today's filing.

Specifically looking at the terms of this deal, this was an agreement to swap about $2 billion in debt for an 82% stake in the reorganized J. Crew. So it's now under new ownership by companies including Anchorage Capital Group, Blackstone's GSO Capital Partners and Davidson Kempner Capital Management. Looking at the company overall, it has about 181 J. Crew branded stores, 140 Madewell stores, and 170 factory stores, most of which have been shuttered nationwide due to the coronavirus pandemic.

So sales really have been dropping. We saw that in the fiscal year ended February 1, with a net loss of nearly $79 million on revenues of $2.5 billion dollars. So a lot of concerns for this company, again, predating the pandemic, now finally culminating with this chapter 11 bankruptcy.

SEANA SMITH: Emily, real quick, while we talk about what could potentially be next, Neiman Marcus is also in a tough spot right now as well.

EMILY MCCORMICK: Absolutely. So we do have some reports from media outlets, including "The Wall Street Journal," that Neiman Marcus, as well as JCPenney have been speaking with their own lenders about potential bankruptcies as well. Looking over across the retail landscape overall, we know that retail sales, as measured by the Commerce Department, were down more than 50% in March from February. So really troubling times for the industry, particularly these stores that have relied heavily on brick and mortar. Seana.