August 2, 2020
by Daphne Sorenson
On August 2, 2020, two major retail companies filed for bankruptcy: Le Tote Inc. (the San Francisco-based parent company of department store Lord & Taylor) and Tailored Brands Inc. (the Fremont, California-based parent company of Men’s Wearhouse, Jos. A Bank, Moores Clothing for Men and K&G Fashion Superstore). Hundreds of stores will be shuttered and thousands of employees will be laid off as a result of these bankruptcies.
In 2019, Le Tote purchased Lord & Taylor from Saks Fifth Avenue owner Hudson’s Bay Co. for $71 million. Lord & Taylor was founded in New York City in 1826, reported $137.9 million of debt obligations in the bankruptcy. At the time of the bankruptcy filing, Lord & Taylor had 38 stores and 651 employees
According to Bloomberg: “Under the deal with Hudson’s Bay, the seller agreed to cover Lord & Taylor’s rent for three years, saving Le Tote $58 million annually. Le Tote said in a court filing Sunday that its companies reported revenue of about $253.5 million in 2019 … Executives at the company have planned to cut the number of Lord & Taylor stores and target younger women with luxury try-on studios, beauty subscriptions and rental drop-off points.”
Tailored Brands was founded in the Houston are in 1973 by George Zimmer, under the name Men’s Wearhouse. Zimmer famously appeared in TV ads for Men’s Wearhouse for several years in the 1980s and 1990s, with the slogan: “You’re going to like the way you look. I guarantee it.” The company went public in 1992, and Zimmer was ousted from the company in 2013, reportedly because he had difficulty adjusting to the company being public instead of private.
At the time of the bankruptcy filing, Tailored Brands had about 1,274 retail and apparel rental stores in the U.S. and 125 in Canada, and employed approximately 18,000 people. As of this writing, it’s unknown how many of these store locations will be permanently closed, but analysts estimate that it will be hundreds.
According to Bloomberg: “The plan calls for a $500 million bankruptcy loan backed by the company’s existing revolving credit facility lenders. Tailored Brands will ask the court’s permission to access the loan combined with cash on hand, including $90 million of previously restricted cash made available to fund operations throughout the restructuring. The bankruptcy loan will then convert to a $400 million revolving credit facility upon emergence from Chapter 11 … The company’s term loan holders will receive their portion of an exit term loan of between $325 million to $425 million and 100% of the reorganized equity, according to court documents. Shareholders will be wiped out, with no recovery from the plan.”
Even before the coronavirus pandemic (when LeTote and Tailored Brands temporarily closed all of retail locations on mid-March 2020), the companies were already headed toward financial disaster, since they had been closing an increasing number of stores since 2018. Depending on the state, county or city in the United States, some clothing retail stores have re-opened since the pandemic, while others have not, as of this writing. The re-opening policies vary.
Le Tote and Tailored Brands are among the growing list of fashion retailers that have declared bankruptcy since 2018. Barney’s filed for Chapter 11 bankruptcy in 2019, while Nieman Marcus did the same in May 2020. J. Crew declared Chapter 11 bankruptcy in May 2020. Low-end clothing retailers that shuttered in 2019 included Gymboree and Payless ShoeSource.
Other fashion retailers that had a massive percentage of store closures in 2018 and 2019 included Victoria’s Secret, Gap, Kohl’s, Abercrombie & Fitch, Foot Locker, Children’s Place and David’s Bridal. A few fashion retailers (such as Charlotte Russe and Bebe) have emerged from bankruptcy and are slowly trying to build back their business under new ownership. Department stores that carry fashion (such as Macy’s, JC Penney, Kmart and Sears) have also been closing stores.