Editor’s note: Earlier this month, luxury retailer Neiman Marcus became the first major US department store to file for bankruptcy during the COVID-19 pandemic. Below, bankruptcy attorney Joseph Acosta shares his thoughts on the news.
By Joseph Acosta
Neiman Marcus is an example of a retailer whose business fundamentals did not protect against something like the COVID-19 pandemic. The company is highly-leveraged with debt that is maturing in the near future, making them less nimble than some retailers.
While the diminished foot traffic in the COVID-19 era certainly did not help this retailer, Neiman Marcus, like many other brick-and-mortar retailers, was already slow to adjust to consumer preferences and did not incorporate e-commerce into its business model quickly enough.
The Neiman Marcus name is not going away any time soon. But, the only thing that saves retailers, like Neiman Marcus, is the strong presence of their legacy and name in the marketplace, giving the company an opportunity to be marketable and conduct substantial business in the future and eventually become profitable again.
Neiman Marcus can utilize the tools in a Chapter 11 process to shed less profitable locations and deleverage its balance sheet of billions of dollars in debt, through a form of recapitalization, leaving it a much stronger company when it emerges from bankruptcy.
Joseph Acosta is a partner at international law firm Dorsey & Whitney in its bankruptcy practice.