J. Crew Group, which includes J. Crew, the long-standing national clothing retailer synonymous with American prep, and its cooler sister brand Madewell, has filed for bankruptcy. It is the first national retailer to do so in the midst of the coronavirus pandemic.
J. Crew Group’s parent company, Chinos Holdings, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Eastern District of Virginia, the company announced this morning.
J. Crew has been on a downward trajectory since Michelle Obama embraced the brand in her role as first lady and an upscale J. Crew Collection graced the runway at New York Fashion Week. Some attribute this to creative director Jenna Lyons’s exit in 2016 and the rotating door of creative directors and lackluster design that followed. Madewell was the J. Crew Group’s one bright spot: It announced a 13% increase in sales in its fourth-quarter filing on March 2.
Under the terms of the bankruptcy agreement, the company will undergo financial restructuring: lenders including the hedge funds Anchorage Capital Group, GSO Capital Partners, and Davidson Kempner Capital Management will convert approximately $1.65 billion of the company’s debt into equity. The company also secured $400 million in debtor-in-possession financing and committed exit financing from those lenders, among others. While still subject to court approval, a DIP filing allows a company to raise capital to keep operations running while a bankruptcy case runs its course, according to Investopedia.
J. Crew Group will continue daily operations, including online sales, and plans to reopen stores as states lift restrictions on nonessential business operations due to the coronavirus, according to the company’s press release. It also states that Madewell will remain a part of J. Crew Group—which makes a lot of sense, considering that it’s the company’s moneymaker.
This is likely the first of many major retail closures. Department stores were slow to adapt to shifting retail trends and consumer behaviors even before the coronavirus, and if anything, the financial strain of the pandemic will force more stores to close for good.
J. Crew did not respond to a request for comment.