SGV Tribune

Coronavirus fallout: Neiman Marcus poised for bankruptcy protection

One retail analyst said consumers will see “unprecedented” discounts as retail chains seek to rebuild their brick-and-mortar foot traffic when the emergency orders lift. He predicts that advertising and ad revenue will soon be “off the charts.”

Neiman Marcus, which operates five Southern California department stores under the Neiman Marcus and Last Call banners, is preparing to file for bankruptcy amid the COVID-19 outbreak while other major major retailers are struggling to avoid a similar fate.

The Dallas-based company didn’t have a lot of options after the health pandemic forced it to temporarily shutter all 43 of its Neiman Marcus locations, as well as its 22 remaining Last Call stores and its two Bergdorf Goodman stores in New York.

Local Neiman Marcus locations include:

  • 6550 Topanga Canyon Blvd., Canoga Park
  • 9700 Wilshire Blvd., Beverly Hills
  • 601 Newport Center Drive, Newport Beach

Local Last Call stores:

  • 600 Ventura Blvd., Suite 1350, Camarillo
  • 20 City Blvd. West, Suite C-1, Orange

$4.8 billion in debt

Neiman’s filing is expected to come within days, according to Reuters. The company is $4.8 billion in debt, and it skipped millions of dollars in debt payments last week, including one that gave it only a few days to avoid a default.

The retail chain is negotiating a loan with creditors for hundreds of millions of dollars. The money would keep some of its operations afloat during bankruptcy proceedings. Neiman has furloughed many of its 14,000 employees.

Last month, Neiman announced it planned to close more than half of its remaining 22 Last Call stores, which sell designer brands at big discounts. That move alone was expected to fuel 500 job cuts over the next eight months.

‘Unbalanced’ management

Neiman’s situation is tied heavily to its 2013 buyout by private equity firm Ares Management Corp. and Canada Pension Plan Investment Board, according to Burt Flickinger III, managing director for the retail consulting firm Strategic Resource Group.

“COVID-19 is affecting everyone from Nordstrom and Neiman Marcus to Macy’s and JCPenney,” he said. “Neiman Marcus has some good financial managers, but things are too unbalanced with Ares Management. From 99 Cents Only to other specialty stores, Ares has not had the retail success across sectors that other companies with a combination of good management and overall leadership have had.”

Shoring up finances

Other department store operators have also seen their finances stretched thin as nonessential services across the nation continue to be shuttered during the pandemic.

Macy’s and Nordstrom have been rushing to secure new financing, including borrowing against some of their own real estate.

J.C. Penney is also contemplating a bankruptcy filing as a way to revamp its unsustainable finances and save money on looming debt payments, Reuters reported.

A rapid recovery

Will these stores survive the economic downturn?

“Department stores will be OK,” Flickinger said. “All of them will take a major hit, but we’re going to see rolling openings that could start as early as May 1 in the Midwest. Consumers will be out for Memorial Day, one of the top 10 weekends for retail, and spending will be even stronger as we move to July 4 and Labor Day.”

Economist Chris Thornberg, a founding partner with Beacon Economics, expects the economy to make a rapid recovery.

“My presumption is we’ll more or less get things back up and running by the third quarter,” he said. “Most restrictions will be lifted in May, although it may take a little longer for some small segments like concerts. We’re looking for a record negative second quarter and record positive third quarter.”

Flickinger said consumers will see “unprecedented” discounts as retail chains seek to rebuild their brick-and-mortar foot traffic. He predicts that advertising and ad revenue will soon be “off the charts.”

Larger sized clothes

But many consumers will be shopping for larger-sized clothes.

“People have been eating more and getting less exercise because they’ve been sequestered at home,” Flickinger said. “There’s been no gym classes, no team sports and no adult leagues for parents. The CDC reports that obesity in America has reached epic proportions.”