M - Department Store Closures Accelerate as Coronavirus Crushes Sector
It's not exactly breaking news that department stores are struggling to stay relevant in the fast-changing retail landscape. However, their long-term problems have turned into existential crises in 2020, as the COVID-19 pandemic forced nearly all department stores to close in mid-March. Some stores are slowly starting to reopen, but they now face new problems: low customer traffic and a glut of unsold seasonal inventory.
On Thursday, privately held luxury department store Neiman Marcus became the sector's first casualty of 2020, filing for bankruptcy. J.C. Penney (NYSE: JCP) may be close behind, after it skipped a debt payment last month. Meanwhile, long-suffering Lord & Taylor reportedly plans to go out of business entirely. Even stronger operators like Nordstrom (NYSE: JWN) and Macy's (NYSE: M) are looking to shrink their store footprints significantly to adapt to the new reality.
Neiman Marcus is the latest in a long line of companies that took on lots of debt through leveraged buyouts and then struggled to pay it back due to deteriorating business conditions. While Neiman Marcus extended some debt maturities last year, this didn't fix the underlying problem of having too much debt and declining earnings.