J. Crew filed for Chapter 11 bankruptcy in a Virginian federal court on Monday, May 4. The fashion retailer has faced financial difficulties for years, which was further exacerbated by the coronavirus pandemic.
So, what happened to J. Crew?
J. Crew CEO Jan Singer announced that the company will now be managed by its creditors — including hedge fund Anchorage Capital Group, GSO Capital Partners, and Davidson Kempner Capital Management.
The move is expected to raise about $400 million, funds necessary for the company to continue operating while it navigates the Chapter 11 bankruptcy proceedings.
"[This is] a critical milestone in the ongoing process to transform our business," Jan wrote in a statement cited by BBC.
"As we look to reopen our stores as quickly and safely as possible, this comprehensive financial restructuring should enable our business and brands to thrive for years to come," she added.
"Throughout this process, we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary Covid-19-related circumstances," Jan wrote.
A number of J. Crew stores are expected to shut down, though it's yet to be determined which ones.
According to USA Today, the company is in talks with a real estate consultancy and a liquidator, who will reevaluate the losses generated by specific stores and arrive at a decision about their future in the forthcoming weeks.
The company's dynamically growing spinoff brand, Madewell, is expected to continue its online trading operations — though some of its stores are likely to be closed down permanently as well.
J. Crew began to accumulate debt after a highly controversial financial overhaul in 2017, which left lenders feeling weary. Madewell was rendered virtually out of reach for investors — while an increasing amount of funds it raised were poured into sustaining the more and more unprosperous J. Crew.
According to Fortune, the move was perceived as shady and deceitful — leading many to wonder about whether it's worth investing in the company in the first place.
Once popular for its affordable, high-quality wares, J. Crew has struggled to meet increasing customer demand and adapt to the rapidly changing online trading sector for the past few years.
The rise of cheap competitor brands and the increasing popularity of online-only outlets like Amazon are thought to be the main reasons behind its demise.
Originally founded in 1947, J. Crew grew from a door-to-door sales company to a clothing catalog business. Its first-ever brick and mortar store opened in 1989.
Currently, it operates 182 J. Crew-branded stores, 140 Madewell stores, and 170 factory stores, notes Los Angeles Times.
The announcement signals larger-scale changes within the sector. According to Financial Times, brands like JCPenney and Neiman Marcus are facing a similar scenario as well.
As the outlet reveals, both chains have missed bond payments in recent days, indicating that they might find themselves in the same position soon.