What Caught Our Attention in the Investment World? – Week of May 4-8, 2020

By Kuldip K. Ambastha

During this week, both J.Crew and Neiman Marcus announced their respective bankruptcy filings. The retail industry has been on fragile ground for many years now, and the coronavirus pandemic has pushed both of these companies into bankruptcy. Due to the public health issues around the coronavirus, brick-and-mortar retailers have had to administer widespread store closures.

As part of its bankruptcy process, J.Crew will be giving ownership to its lenders. J.Crew is the first prominent American retailer to file for bankruptcy due to the pandemic. The company’s debt will be restructured and permanent closures of some stores will occur eventually. Market volatility meant that an IPO for J.Crew’s Madewell business unit could not happen. Madewell will stay a part of J.Crew for now, and Madewell’s CEO (Libby Wadle) will stay in her post. J.Crew had struggled with customers shifting to online shopping over going into physical stores. Furthermore, J.Crew was sharply criticized for raising prices of its items.

In the same week and also due to the coronavirus pandemic, Neiman Marcus became the first major American department store company to file for bankruptcy. Neiman Marcus was overwhelmed by its debt load. By filing for bankruptcy, Neiman Marcus will be able to restructure its finances, invest in some strategic brick-and-mortar stores, and enhance its online platform. For many years, Neiman Marcus was well-known for its seasonal catalog of offerings (such as clothing, jewelry, and holiday gifts) which appealed to wealthy American individuals. Unfortunately, debt and retail industry pressures ended up making Neiman Marcus unable to sustain itself as a going concern.

In one week, two famous American retail companies went bankrupt. Due to the ongoing coronavirus pandemic, these two retail companies sadly may just be the first two of many retail companies to go bankrupt.

Keywords – J.Crew, Madewell, Libby Wadle, Neiman Marcus, bankruptcy, bankrupt, retail, retailer, debt, equity, finances, coronavirus, COVID-19, pandemic, public health, brick-and-mortar, stores, online, platform, fashion, wealth, wealthy, affluent, American.

Disclosure – The principals and clients of Ambastha Financial LLC have no positions in J.Crew and Neiman Marcus, since neither company has publicly traded stock.

Disclaimer – No recommendations are being made via this post. Past performance is not an indicator of future performance. As an investor, you should do your own research and seek professional advice from a Registered Investment Adviser (RIA). You can lose money by investing in stocks and other instruments. Ambastha Financial LLC does not assume any responsibility (legal or otherwise) for any losses that may occur as a result of actions taken based on this post. All content copyrighted © 2020 – Ambastha Financial LLC.

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