The company had 69 stores across the three brands last year, including a massive new store in the new upscale Hudson Yards development in New York. But in March, Neiman announced plans to permanently close a “majority” of its 22 Last Call stores.
A bankruptcy filing does not necessarily mean that a company will go bankrupt. Many companies use bankruptcy to get rid of debt and other debt they cannot afford while closing unprofitable operations and sites.
Long-standing problems before the coronavirus crisis
Neiman’s problems go back long before the crisis began.
In addition to the trend against traditional department stores, its fate was most likely sealed in 2013 when Ares Management and the Canada Pension Plan Investment Board paid out $6 billion in a takeover by loan, privatizing the company.
“The big problem with Neiman’s is that the [private equity] the guys paid too much and ran up too much debt,” said Steve Dennis, retail consultant and former Neiman executive.
And beyond ownership structure and debt, Neiman has faced challenges similar to those of other department stores: Consumers have more options than ever to shop for clothes.
“Neiman’s has struggled for a long time to acquire new, younger customers,” Dennis said. “There is too much space in luxury department stores chasing a stagnant segment.”
The retailer “faces an uphill battle in the coming months to emerge from bankruptcy,” Ukanwa said. “This is likely just the beginning of retailer bankruptcies in the coming months, especially for luxury retailers and those that don’t have a strong online presence or infrastructure, like Neiman.”
Nieman seemed to be heading in the right direction until the crisis hit. According to Debtwire, which tracks the finances of struggling companies, privately held Neiman posted improved adjusted earnings before interest and taxes in the quarter that ended in January, the period that included the holiday shopping season. . While sales at stores open for at least a year fell 1.6% from a year earlier, its cash and available borrowings increased to $439 million, up 24% from a year earlier. just three months earlier.
Bad news for retail
Neiman’s bankruptcy filing is a sign of the strain the pandemic has put on retailers. UBS analysts said last month that “retail store closures are set to accelerate in a post-COVID-19 world” and that the gap between well-positioned retailers and struggling chains will widen in reason for the epidemic.
“The pandemic recession is driving consumers away from luxury goods and accelerating their transition to online retail,” said Kalinda Ukanwa, assistant professor of marketing at the University of Southern California’s Marshall School of Business. .