Lights shine near a closed Macy's Herald Square as people remain at home to stop the spread of coronavirus on March 29, 2020 in New York City.
Noam Galai | Getty Images
It was another onslaught of bad news from America's department store chains this week. And that likely will not be letting up anytime soon.
Luxury chain Neiman Marcus filed for Chapter 11 bankruptcy protection, while Lord & Taylor is reportedly looking to liquidate its stores as soon as they are able to reopen again. Nordstrom said it is permanently closing 16 locations, while J.C. Penney skipped another interest payment, speeding up the clock for its potential bankruptcy filing. And Macy's announced it will be pushing off reporting quarterly earnings, due to the disruption it has faced from the coronavirus pandemic.
Stage Stores, which operates regional department stores including Gordmans, Bealls and Goody's, is preparing for a bankruptcy filing that could come as soon as next week, CNBC reported Friday morning. It has about 700 locations in total.
Department store retailers including Macy's and Penney were already struggling prior to the Covid-19 virus battering the global economy, forcing thousands of retailers' shops shut, and seemingly overnight. Some such as Macy's have started to reopen their doors for business. But that does not mean the pain is near being over. Far from it, actually.
"We've entered into the most transformative state of the industry that we have seen in 50-plus years," said Michael Brown, a partner at consulting firm Kearney's consumer products and retail practice. "The weaker players will be hit hard by this."
Here is a rundown of everything that happened this week.
Neiman Marcus
Neiman Marcus, saddled with debt and hit by the coronavirus pandemic, filed for Chapter 11 bankruptcy on Thursday. The filing will help the company eliminate roughly $4 billion in debt that remains as a memento from its sale to private-equity firms Ares Management and the Canada Pension Plan Investment Board in 2013. The pandemic had forced it to furlough the majority of its 14,000 workers and to close its 43 Neiman Marcus stores.
"Like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business," Chief Executive Geoffroy van Raemdonck said in a statement. "The binding agreement from our creditors gives us additional liquidity to operate the business during the pandemic and the financial flexibility to accelerate our transformation. We will emerge a far stronger company."
But even if Neiman Marcus is able to emerge, the luxury retail market is not expected to bounce back anytime soon.
Sales of personal luxury goods globally could decline as much as 60% during the second quarter due to the coronavirus pandemic, according to a report from Bain & Co. released this week. The consulting group is forecasting the luxury market could contract anywhere between 20% to 35% this year, as sales of expensive clothing, jewelry, watches and beauty products are expected to plummet.
Macy's
Macy's announced Thursday evening that it plans to delay its quarterly earnings report for the period ended May 2. It said it plans to release first-quarter results on July 1, but will share sets of preliminary data on May 21 and June 9.
The crisis, which forced it to furlough the majority of its 130,000 workers, has slowed its "routine quarterly close process," Macy's said in a filing with the Securities and Exchange Commission. It added that it expects to incur a goodwill impairment charge during the first quarter because its market value has declined drastically of late. Macy's shares have fallen more than 68% this year. It recently lost its spot on the S&P 500.
"These are unprecedented times for the country, the retail landscape and Macy's," Chief Executive Jeff Gennette said in a statement.
On April 30, during a fireside chat with Gordon Haskett analyst Chuck Grom, Macy's said it was well into the financing process to raise debt, to come up with additional liquidity to weather the Covid-19 crisis. The company has already pulled down its full $1.5 billion credit revolver.
"We are confident that new financing will be in place before we need it, allowing us to extend our financial flexibility over both the short- and long-term," Gennette said.
Meantime, Macy's reopened 68 stores this past Monday, marking the first phase of its reopening plans. Gennette said the retailer plans to have all of its locations reopened in six to eight weeks, granted Covid-19 infection rates continue to taper off.
J.C. Penney
Penney said in an SEC filing Thursday that it elected not to make a $17 million interest payment due on its senior secured term loan. Under its loan agreement, that means the company has a grace period of five business days to pay before it enters into default.
"JCPenney made the strategic decision to not make an interest payment due on May 7 and take advantage of the grace period to continue ongoing constructive discussions with lenders and maximize financial flexibility," a spokeswoman told CNBC in a statement.
This marked Penney's second skipped interest payment during the coronavirus pandemic. On April 15, it elected not to make a $12 million payment, triggering a 30-day grace period.
Filing for bankruptcy is one option the company is considering, a person familiar with those discussions has told CNBC.
Meantime, Penney announced in a press release late Thursday that it has "reaffirmed" its partnership with make-up retailer Sephora, having "worked constructively to resolve outstanding legal matters and have agreed to mutually beneficial revisions to their joint enterprise operating agreement."
As part of a 14-year partnership, Sephora operates mini shops inside more than 650 of Penney's department stores. During the pandemic, it had threatened to pull out, and then Penney responded by filing a temporary restraining order against Sephora to block it from doing so.
Lord & Taylor
The storied department store chain Lord & Taylor has lined up liquidators and is preparing to liquidate its 38 department stores, as soon as they can reopen again, Reuters reported this week.
The fashion start-up Le Tote acquired Lord & Taylor from Saks Fifth Avenue owner Hudson's Bay Company in 2019. As part of the deal, however, Hudson's Bay was set to retain ownership of its Lord & Taylor real estate and, starting in 2021, would be granted the right to reassess and potentially redevelop those locations.
According to the Reuters report, Hudson's Bay might use a bankruptcy filing by Lord & Taylor to take back some leases. Spokespeople from Lord & Taylor and Hudson's Bay did not immediately respond to CNBC's requests for comment.
Earlier last year, Hudson's Bay sold Lord & Taylor's iconic flagship store in Manhattan to co-working company WeWork.
Nordstrom
Nordstrom announced this week it will permanently close 16 department stores, after assessing the market and the impact from the pandemic. It did not name which locations are set to go dark. It currently operates 116 full-line department stores across North America, absent its off-price Nordstrom Rack locations.
"These closures represent the first contraction announced in the department-store sector due to the coronavirus as the sector continues to right-size, finding the optimal number of stores post pandemic," Coresight Research CEO and Founder Deborah Weinswig said. "The sector was showing signs of struggle pre-coronavirus, and we believe this may have quickened some of the closure announcements."
Nordstrom, meantime, is restructuring its regions, support roles and corporate organization, which should result in additional cost cuts of roughly $150 million, the company said, without providing any other details on those cuts.
"More than ever, we need to work with flexibility and speed," Chief Executive Erik Nordstrom said in a statement.
The company had already drawn down $800 million on its revolving line of credit and issued an additional $600 million in secured debt financing.
Nordstrom also this week laid out its plans to begin reopening stores, on a market-by-market basis. Still, as is the case with all department stores, it is unclear how soon shoppers will be back.
Until there is a vaccine for the coronavirus, consumers may limit their visits to public places like shopping malls, even as government-imposed restrictions are lifted. The economy is also in shock, as a ripple of effects of coronavirus-induced restrictions wears on. Unemployment is at historic levels, surging to 14.7% in April, the Labor Department reported Friday.
—CNBC's Lauren Hirsch contributed to this reporting.
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