Image: J. Crew

The list of fashion brands and apparel retailers that are expected to suffer significantly as the COVID-19 crisis compounds existing fragilities in the retail market is long, and J. Crew, which filed for Chapter 11 protection on Monday, is just one of the names in the mix. The highly-expected restructuring move by the ailing American retailer that is J. Crew, which cited assets and liabilities at between $1 billion and $10 billion in its formal filing with a Virginia court, has left many colorful-knit and classic khaki-loving consumers asking what J. Crew’s bankruptcy (and the other retail bankruptcy that will inevitably follow) means for them. Here is a break down … 

For things first, there are different types of bankruptcies, which all come with different implications and outcomes. Although, most generally focus on enabling businesses – or individuals, depending on the filing party (and the type of bankruptcy proceeding) – to eliminate debt and/or to help them repay a portion of what they owe, which can be accomplished by way of a reorganization of a debtor’s business affairs, debts, and assets, for instance, or by liquidating a business or selling it. 

Of the various types of bankruptcy, J. Crew is relying on – and a long list of other retailers have looked to – Chapter 11, a common form of bankruptcy protection in connection with which a bankruptcy court will help the company to restructure its debts and obligations – while remaining open – and enable it the company to stay afloat, at least temporarily. The process begins with the filing of a petition with the relevant bankruptcy court by the debtor (the entity that owes the debt – J. Crew in the case at hand). This is followed by the debtor proposing and executing a reorganization plan to manage and in some cases, eliminate certain classes of debt, which can take the form of downsizing of business operations to reduce expenses, as well as renegotiating of debts – i.e., closing underperforming brick-and-mortar stores, renegotiation lease terms, etc. 

(In some cases, as we saw with Barneys New York, for one, a bankruptcy filing may involve liquidating all assets to enable the debtor to repay its creditors; this, however, is not a Chapter 11 scenario, but instead, a Chapter 7 one). 

That is what happens (in a nut shell) on the backend, but what about the consumer-facing elements of a business that is in the midst of Chapter 11 bankruptcy proceedings? Well, to a certain extent – and despite the fact that “bankruptcy often leaves the impression of utter failure, and when a company goes bankrupt, it’s easy to assume that it’s dead,” as Eliza Brooke put it last year – very little might actually change. 

Forever 21, as you may recall, filed for Chapter 11 bankruptcy in September 2019, and was acquired by Simon Property Group, Brookfield Property Partners and Authentic Brands as part of a deal approved by a Delaware bankruptcy court this February. While the news made headlines, largely in connection with commentary on the fall of fast fashion, the bankruptcy did not come with the price-slashing sales or across-the-board brick-and-mortar store closures that you might associate with bankruptcy. In fact, from a consumer standpoint, the 35-year old retailer – which helped pioneer the early wave of fast fashion, bringing trendy, runway-inspired garments and accessories to consumers for cheap – has largely continued its business as usual. It closed more than 100 brick-and-mortar stores (mostly outside of the U.S.), but still maintains more than 800 stores. 

All the while, its shelves are being stocked with new, trend-specific wares, and it is promoting its philanthropic COVID-19-centric initiatives, and rolling out collabs with the likes of gaming company Loteria. 

As a whole, Forever 21 said the restructuring – and ultimately, the new ownership – would “allow it to focus on the profitable core part of its operations,” with a representative for the company stating in February that the deal with Simon Property Group and co. enables it to “keep its headquarters, stores and e-commerce operations open, and to [continue to] provide fashions and trends that customers know and love for years to come.”

J. Crew is sending much of the same message in its early bankruptcy communications. In a statement on Monday, J. Crew Group’s CEO Jan Singer said that “throughout [the bankruptcy] process,” which will help the ailing retailer to manage its nearly $2 billion in debt (most of which is tied to its 2011 leveraged buyout by the private-equity firms TPG Capital and Leonard Green & Partners), “we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary COVID-19-related circumstances.”

In a letter to customers on Monday, which was complete with a “Frequency asked questions” section, J. Crew answers the question – of how the bankruptcy proceedings will actually impact consumers – point blank, stating, “We are and will remain fully operational throughout this restructuring process, although we will continue operating under the COVID response measures currently in place and look forward to reopening our stores in accordance with CDC guidance as quickly and safely as possible.” 

In the meantime, the company says, “We continue to offer the same high‐quality products you love and great customer service you expect from J.Crew, J.Crew Factory and Madewell through our e‐commerce platforms,” noting that it expects that “all company policies, including our rewards programs, gift cards, returns and exchanges, among others, will continue as usual.” 

Another big question on the company’s FAQ: Will the bankruptcy process “affect product prices or offerings?” And to that, the company says no. “Merchandise pricing and offerings will not be affected,” which means that the domination if its e-commerce site and its products by sales – such as the current 60 percent of swimwear and shorts promo – is not the result of the Chapter 11 filing. Instead, it is likely just part of the company’s existing pattern of discounting and/or part of a larger effort by retailers to slash prices in order to move merchandise that is not selling as well due to shifting consumption patterns in light of the COVID-19 pandemic. 

Emphasizing that this is “not a liquidation filing,” J. Crew tells consumers in its release that the Chapter 11 filing is part of “an orderly, court‐ supervised process that protects [its] ability to conduct business, while working toward the day when it can emerge as a stronger and more secure competitor in the marketplace.”

And this is not just the case for J. Crew. This is the same process (generally speaking) that the other retail companies that are expected to look to Chapter 11 protection in the coming weeks and months will undergo. In short: Just because your favorite brand filed for bankruptcy does not mean that its operations will change entirely; in fact, but for the headlines, you might not even notice a shift.