American fashion retailer J. Crew, once frequently worn by former First Lady Michelle Obama, filed for bankruptcy on Monday as it succumbed to the COVID-19 crisis. It has become the first American retailer to file for bankruptcy protection during the pandemic. Experts point out that there will be more of such cases down the road.
J. Crew Group filed for Chapter 11 bankruptcy protection in federal bankruptcy court in Richmond, Virginia, The Wall Street Journal (WSJ) reported. About 2 billion dollars of J. Crew’s total debt will be cancelled and exchanged for roughly 82% of equity in the retailer.
First started as female clothing brand Popular Club Plan in 1947, J. Crew Group launched J. Crew in 1983 and gained popularity for its preppy style. It was a go-to brand for many Hollywood celebrities, such as Jessica Alba and Reese Witherspoon.
But faced with increasing competition from online brands and late comers, J. Crew recorded losses for six years in a row since 2014. After closing about 500 stores in March this year, the retailer expected to lose 900 million dollars in sales. “J. Crew’s bankruptcy will be the first in a wave of defaults among retailers with weak balance sheets,” said Raya Sokolyanska, Moody's vice president and lead analyst.
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