Fashion retailers enter COVID-19 tailspin

Fashion retailer J. Crew Group Inc., along with subsidiary, Madewell, filed for Chapter 11 bankruptcy protection this week in the midst of the COVID-19 crisis.

In an agreement with its lenders, J. Crew will restructure its debt to convert $1.65 billion of debt into equity and will receive $400 million in debtor-in-possession financing from lenders including Anchorage Capital Group L.L.C., GSO Capital Partners and Davidson Kempner Capital Management LP.

“The significant deleveraging contemplated by this agreement, coupled with J. Crew Group’s strategy to strengthen its robust e-commerce platforms to drive continued growth in its direct-to-consumer segment, will position the company for future success,” said Kevin Ulrich, CEO of Anchorage Capital Group.

The preppy clothing retailer has four St. Louis-area locations, including Saint Louis Galleria, Plaza Frontenac, and two outlet stores in Chesterfield.

Neiman Marcus is also battling against the effects of COVID-19. The debt-laden, Dallas-based company shut all 43 of its sites, including the Plaza Frontenac location, roughly two dozen Last Call stores and its two Bergdorf Goodman stores in New York.

The luxury retailer is in the final stages of negotiating a loan with its creditors totaling hundreds of millions of dollars, which would sustain some of its operations during bankruptcy proceedings, according to Reuters, and has furloughed many of its roughly 14,000 employees.

“I think the Neiman situation is an example of what’s really going on in retail right now. These companies first were facing major liquidity issues, now they’re facing what it’s going to look like to open and then what are (their) sales going to be like,” said former Saks Fifth Avenue CEO, Steve Sadove.

Other retail stores with St. Louis locations that are struggling under the weight of the COVID-19 crisis include:

-Pier 1 – Filed for Chapter 11 in February 2020

-Art Van Furniture – Filed for Chapter 11 in March 2020

-Macy’s – Closing stores and cutting corporate staff

-Forever 21- Filed for Chapter 11 in 2019

-JC Penney- Contemplating a bankruptcy filing -Reuters

-Nordstrom – Borrowing against some of its real estate to stay afloat

-Sears – Filed Bankruptcy in 2018; Has lost $12 billion since its last profitable year in 2010.

“These stores are looking at reopening with issues like buyers not wanting to buy inventory that’s been sitting for three months. I think we could see 23% of mall stores not reopen. There could be 400-500 US malls fail over the next year, post-corona virus,” said retail expert, Jan Kniffen, CEO of J Rogers Kniffen WWE, LLC.

The retail graveyard is filled with companies that emerged from bankruptcy with plans to continue to operate but soon went out of business. These include Payless Shoes, Gymboree, American Apparel and RadioShack.

Retail stores awaken in the midst of COVID-19 shutdowns

Simon Property Group, the largest shopping mall operator in the United States, plans to reopen 49 malls and outlet centers starting Friday through Monday for the first time since their March 18th shutdown.

Three of the malls are located in Missouri and will open on Monday, May 4, including St. Louis Premium Outlet in Chesterfield, Battlefield Mall in Springfield and Osage Beach Outlet Marketplace in Osage Beach.

Best Buy also recently announced reopening plans, which include allowing customers to schedule in-store consultations in about 200 of its U.S. stores beginning in May. During the pandemic, the big-box retailer temporarily shut stores and switched to a curb-side pickup model.

According to a study done by Coresight Research, 45% of consumers expect to avoid shopping centers and malls even after the lockdown ends, citing more people will avoid malls than movie theaters or public transportation.

However, the pandemic has not slowed down area retailers; who are renewing their leases - and in some cases - even opening new stores.

In Hazelwood, Mo., a new Dollar Tree is opening this summer in the Village Square Center. The low-cost retailer will occupy approximately 11,000 SF of the once defunct shopping center located at Lindburgh Blvd and Interstate 270.

New York based, Somera Road Inc., bought the dilapidated, mixed-use shopping center in December 2018 and has invested more than $1 million in renovations.

"Dollar stores are continuing to open new locations in this challenging market. The affordability of their product makes them resistant to market downturns. We were thrilled to recently sign Dollar Tree to a long-term lease at our (Village Square) property," said Michael Ervolina, senior associate at Somera Road.

Other occupants include Concentra Urgent Care, Axes Physical Therapy and Millstone Weber, who all signed new lease agreements with Village Square.

It’s important to note, most retailers are adhering to CDC guidelines upon reopening. Simon Property Group, for example, has implemented CDC recommendations and precautions including:

·     Handing out CDC-approved masks and hand-sanitizing packets (at no cost to shoppers)

·     Mandating all employees to wear masks and wash their hands frequently

·     Taking customer temperatures using infrared thermometers

·     Encouraging social distancing in restrooms (tape will be placed over every other sink and urinal)

·     Directing traffic flow with decals on the floor

·     Limiting food court seating

·     Closing children’s play areas

·     and closing public drinking fountains.

Operating hours will be limited to 11a.m - 7 p.m., Monday through Saturday, as well as 12 p.m. - 6 p.m. on Sunday to allow for cleaning and sanitization, according to a Simon Property Group company memo.