J. Crew is preparing a bankruptcy case that could occur this weekend

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Apparel company J. Crew is preparing for bankruptcy which could take place this weekend, people familiar with the matter told CNBC.

Private company J. Crew is working to secure $ 400 million in funding to finance the bankruptcy operations, said the people, who requested anonymity because the information is confidential. They warned that the timing could still slip and that the plans are not yet finalized.

A spokesperson for J. Crew declined to comment.

The New York-based retailer had previously faced heavy debt and sales problems as it was criticized for losing touch with its previously loyal customers. In recent years, the brand has lost both its long-time design manager, Jenna Lyons, and famed retail director Mickey Drexler.

These challenges have been exacerbated by the coronavirus pandemic which has forced stores to close, plunging the retail industry into disarray.

The retailer operates 182 J. Crew retail stores, as well as 140 Madewell stores, the young brand it launched in 2006. J. Crew had hoped to split Madewell into an IPO that could have helped pay down its debt, but had to deal with a decline in creditors.

J. Mrew made about $ 2.5 billion in sales for its fiscal year ended February 1, according to Moody’s. The research firm estimates that it had approximately $ 93 million in total cash in February and an imminent maturity of 2021.

The company was acquired by TPG Capital and Leonard Green & Partners for $ 3 billion in 2011.

J. Crew joins a list of retailers, including Neiman Marcus and J.C. Penney, who were already struggling before the pandemic, but who appear to be threatened by the devastating impact of the coronavirus on the economy. The multi-year expansion of the gross domestic product in the United States came to an abrupt end in the first quarter, as the economy contracted 4.8%, while more than 30 million people claimed unemployment benefits.

Yet, unlike department stores, industry analysts say that companies with strong brands, such as J. Crew and its sister brand Madewell, may be in the best position to survive the upheaval in retail. J. Crew has developed an e-commerce activity and can sell directly to buyers without having to use third-party sellers or make purchases in store.

J.Crew had started to see a “significant improvement” in its activities in 2019, according to Moody’s, correcting execution problems the previous year.

Correction: J. Crew launched his Madewell brand in 2006. An earlier version distorted the year.

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