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Amid the Covid-19 pandemic, many retailers are losing business and filing for bankruptcy. As of August 3, 2020, Lord and Taylor, one of the oldest department stores filed for bankruptcy. Though business was already in trouble prior to the pandemic.
Why is Lord & Taylor Going Bankrupt?
Lord and Taylor is one of the oldest U.S. department stores. The Manhattan-based store was founded in 1862 by two English immigrants. After the brand saw a slow down in business this year, they decided to improve their efforts. Unfortunately, no one anticipated a pandemic, thus the business closed in March to help slow the spread of the coronavirus.
However, some reports suggest that long before the pandemic, Lord & Taylor was in trouble. The department store is famous for its upscale fashion and beautiful holiday window displays. Now they will be famous for their $137.9 million debt. Like many companies, this year, Lord & Taylor was forced to file for chapter 11 bankruptcy.
Bankruptcy and The Pandemic
Furthermore, the brand owner, Le Tote Inc., along with the retail chain filed for bankruptcy. Last year, Le Tote brought Lord & Taylor’s for $71 million. In this transaction, The french based fashion start-up gained rights to the company’s stores, brand, and e-commerce site. The store joins J.Crew Group Inc., Tailored Brands, and Neiman Marcus in the long list of department stores filing for bankruptcy.
Additionally, reports say that prior to the pandemic Lord & Taylor struggled with shifting their business online. This may have contributed to the retail chain’s demise.
The news also supports claims of business being rocky prior to the pandemic. Not to mention that the retail chain sold its flagship buildings on New York’s Fifth Avenue last year. For other retailers who have filed bankrupt, this also seems to have been a problem.
Will Bankrupt Brands Continue Elsewhere or Cease to Exist?
Lord & Taylor executives plan to cut a number of stores and redirect their business. The retail giant will target young women with luxury try-on studios, beauty subscriptions, and rental drop-off points.
With this new deal, the seller will cover their rent for three years. This will save Le Tote $58 million annually. Which will be a big help to the retail business as their debt is set at $253.5 million.
Moreover, for brands like J.Crew and Neiman Marcus, the future remains unknown. On the other hand, Tailored Brands plans on continuing its business through several other stores. Including Men’s Wearhouse, Jo’s A. Banks stores, K&G Fashion Superstore, and Moores Clothing for Men.
This proposed restructuring plan should reduce the company’s debt by $630 million. Though, hopefully, the company will also be able to have some financial flexibility.
Retail businesses may have to take more precautions to avoid situations like these in the future. According to NBC News, “As of July 23, roughly 40 retailers, including big and small companies, have filed for Chapter 11 bankruptcy so far this year.” This exceeds the bankruptcy rate from last year. In addition, nearly two dozen other companies have filed for bankruptcy protection amid the pandemic.
Nonetheless, businesses like Lord & Taylor seem to have been in trouble long before the pandemic. This is in part due to public health measures. The retail giant is based in Manhattan, New York, which was the epicenter of the virus in earlier months. This caused the store to shut down.
However, prior to this, as mentioned before Lord & Taylor struggled to get their brand online. Considering that more people have switched to online shopping, the brand would have been extremely successful in this venture. In fact, the brand might have avoided bankruptcy.
In the end, Lord & Taylor’s future remains unknown as many other things are during this time. Hopefully, the brand is able to recover and other businesses take this as a warning. This is not just a big brand problem either, many smaller brands have been impacted heavily. Thus, all brands should view this situation with caution.
Written by Reginae Echols
NBC News: Lord & Taylor, Men’s Wearhouse owner file for bankruptcy
CNN Business: Lord & Taylor files for bankruptcy protection
Yahoo! Finance: Lord & Taylor, Oldest U.S. Department Store, Goes Bankrupt
Featured Image Courtesy of Mike Mozart’s Flickr Page-Creative Commons License
Inline Image Courtesy of Helen Alfvegren’s Flickr Page-Creative Commons License