Survival mode: retailers take extreme action
Non-essential retailers who are eager to re-open stores face hard choices after President Donald Trump on Sunday, March 30 extended national social distancing guidelines to April 30.
The guidelines to stay at home and avoid groups of more than 10 are just that, and retailers can choose to open stores if doing so doesn’t violate state orders. However, shortly after a national emergency was declared on March 13, many retailers opted to close stores and eyed late March or early April as an opening date, thinking a two week physical hiatus would be adequate. Now, some retailers have begun to extend their temporary closing dates while implementing extreme cash conservation measures to weather a public health crisis that strikes at the heart of retail as a social activity.
Amid great uncertainty around when it will be safe for non-essential store to re-open, retailers are implementing a wide range of cash conservation measures to ensure long term survival. There have been a barrage of announcements lately from companies who are cutting capital expenditures, suspending dividend payments, furloughing workers and reducing or eliminating executive compensation. For example:
- Nordstrom extended its temporary stores closes until at least April 5 and beginning that day will furlough an undisclosed number of corporate employees for six weeks. “This is the most difficult decision we have made in our company's long history,” said Nordstrom CEO Erik Nordstrom. Since announcing its store closures on March 17, Nordstrom has provided pay and benefits to all store employees. Meanwhile, the company is saving millions because the executive leadership group took a pay cut, Erik Nordstrom and his brother Pete won’t draw a check until September and the company’s board is forgoing cash compensation for six months.
- Macy’s closed its stores on March 17 and target March 31 as a re-opening date. It also froze hiring and spending, reduced receipts, cancelled some orders and extended payment terms for all goods and services. The company also reduced pay for all levels of management at the director level and above, effective April 1 and lasting for the duration of the crisis. Jeff Gennette, chairman and CEO, said he wouldn’t take a salary.
- Stage stores said it was temporarily closing all of its 738 stores after initially closing 398. The company said virtually all of its store employees would be furloughed as would 87% of those at its Houston headquarters without pay. The 80 employees who remain in Houston will take a 25% pay cut and board members will receive no pay.
- Fashion retailers are being hit hard. Guess?, Inc., has extended its store closures in the U.S. and Canada indefinitely. Express also said its stores will remain close until further notice.
- Accessories retailer Claire’s Stores said all of its stores worldwide were closed and affected workers are on unpaid furlough along with 250 corporate office employees. Other corporate employees are working from home and the configuration of distribution centers has been adjusted to practice social distancing. “As we continue to focus on the safety of our employees and communities, it has now become clear that our stores will need to remain temporarily closed until further notice," said CEO Ryan Vero, who, along with other executives, took a 30% pay cut.
- Gap Inc., temporarily closed its North American stores on March 17 and in a recent update did not indicate when they would reopen. The company deferred its dividend payments to 2021, reduced capital expenditures by $300 million and said it is reviewing all operating expenses for opportunities to reduce spending.
- Tailored Brands, parent company of Mens Wearhouse and Jos. A Bank, said its temporary store closures would be extended to at least May 4. The company also said it was furloughing all U.S. store employees and a significant portion of employees in its distribution centers and home office. Senior executives also took pay cut.