Neiman Marcus Bankruptcy Points To Concerns About Luxury Retail In The Wake Of Covid-19 Crisis
One of the business sectors hardest hit by the COVID-19 pandemic has been the global luxury retail market, as the word “essential” has taken on more meaning and value to consumers who are watching every penny they spend. The latest evidence is the May 7 announcement by Neiman Marcus Group that it is filing for bankruptcy just weeks after the novel coronavirus crisis temporarily forced the closure of all 43 of its stores in the United States, as well as its two Bergdorf Goodman locations and Last Call outlets, which has all but halted sales and devastated revenue.
Neiman Marcus now becomes the first major department store to file for bankruptcy protection during the pandemic, and it follows the collapse of Barneys New York late last year and the privatization approved by Hudson’s Bay shareholders this past February. It also comes amid growing shadows over chains such as Lord & Taylor, and JCPenney.
Clearly, the economic uncertainty brought on by COVID-19 is wreaking havoc on lives, livelihoods, businesses and consumer confidence. As a result, there has been a retreat away from luxury goods and those “nice to haves” and an entrenchment around the words “just the bare essentials.” The pandemic has only been the tipping point for the luxury retailers already suffering by severely weakened sales even before the crisis hit. Walking into a luxury retailer during COVID-19 may also be causing some societal “shaming,” as so many around the world are now facing such unprecedented hardships.
In a letter to customers, Geoffroy van Raemdonck, chief executive of Neiman Marcus Group, said the company was not liquidating and would come out of bankruptcy “a stronger company with the ability to better serve you and continue our transformation over the long term.”
And transformation will be the key for many well-known luxury retailers. In an early April 2020 webinar, which saw the participation of 55 international luxury retail executives, they best characterized the industry mood as one of “uncertainty but also optimism.” An instant poll taken on the webinar revealed that 10 per cent felt the crisis would be negative for their business, 24 per cent were uncertain about its impact and nearly two-thirds believed that it would bring about some positives by accelerating much-needed change.
Uncertainty around the projected length of the crisis was a major concern of these executives, just as it is for every industry in the world and around every family’s kitchen table.
The current crisis poses a key question for the luxury market: “Will there be enough space for everybody?” Experts agree the crisis will reveal certain winners and losers, and accelerate industry consolidation within the luxury markets. They also say luxury firms with balanced international sales will fare better, and those retailers who just rely on sales from international travellers will fare much worse.
For the luxury retail market and global luxury brands — as it is for every other aspect of modern life and society — the “new normal” on the other side of this crisis will be anything but usual.