As we previewed on month ago in ‘Work-From-Home’-Epidemic Set To Bankrupt Suit-Sellers, “I Guarantee It“, on Monday the retail wreck continued on Sunday when Tailored Brands, the owner of Men’s Wearhouse filed for bankruptcy, adding to a list of brick-and-mortar retailers that have succumbed to the economic fallout from the COVID-19 crisis.
The retailer filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas. Tailored Brands said in a statement that it has entered into a restructuring agreement with more than 75% of its senior lenders, and that could reduce the company’s debt by at least $630 million. The company also said it has received commitments for $500 million in debtor-in-possession financing from its existing lenders. In the court filing, the company listed both its assets and liabilities in the range of $1 billion to $10 billion.
The Houston, Texas-based retailer, which was already struggling with competition from fast-fashion brands and a shift to online shopping before the pandemic, said it will continue to build on its previously announced plans to reduce its corporate workforce by 20% and shut as many as 500 stores.
The company’s four retail brands, including Moores Clothing for Men and K&G Fashion Superstore, will continue to operate through the process. It employs 18,000 workers and operates 1,274 retail and apparel rental stores in the U.S. and 125 in Canada, according to court documents.
Tailored Brands was in a tough spot before the outbreak: sales had fallen every year since 2016 as Men’s Wearhouse and Jos. A. Bank contended with changing consumer tastes and e-commerce rivals. “The unprecedented impact of Covid-19 requires us to further adapt and evolve,” Chief Executive Officer Dinesh Lathi said in a statement.
Despite its filing which will eliminate most of the company’s debt. Tailored Brands is gradually returning to normal operations after the coronavirus temporarily shut its doors. It re-opened just under half of its stores as of June 5, according to a statement. All of them, as well as e-commerce distribution centers in the U.S. and Canada, were temporarily closed in the first quarter.
The company traces its roots to 1973, when George Zimmer started Men’s Wearhouse in the Houston area. He would go on to become the face of the brand, starring in television commercials spouting his catchphrase “You’re going to like the way you look — I guarantee it,” before he was ousted in 2013. It acquired Jos. A. Bank the following year.
Tailored Brands has hired law firm Kirkland & Ellis LLP as legal advisor, investment bank PJT Partners as financial advisor and AlixPartners as restructuring advisor according to Bloomberg.
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With its filing, Tailored Brands became the latest to collapse as a result of widespread economic lockdowns which have drained revenue, pushing already-struggling companies like J.C. Penney, J. Crew Group, and Neiman Marcus Group into bankruptcy. Lord & Taylor also filed Chapter 11 on Sunday.
The following chart from ReorgFirstDay shows the precipitous surge of retail chain bankruptcies in just the first half of 2020, with many still on deck.
As Reuters notes, apparel retailers have been among the worst hit from the coronavirus crisis as their businesses were considered non-essential and their stores had to be closed. They were forced to limit operations to online, which led to furloughing of staff and unpaid leases and rents.
Separately, Lord & Taylor, a storied department store chain founded in 1826, billed as the oldest in the United States, also filed for Chapter 11 bankruptcy on Sunday.