Macy’s said the majority of its employees will be furloughed beginning this week as it copes with significant sales losses during the coronavirus pandemic.
The retailer declined to say how many employees will be affected by the furloughs. It said it’s lost most of its sales, even as it remains open online, and that’s why cost cuts are necessary.
Macy’s is one of dozens of retailers that have been forced to close stores to slow the spread of the coronavirus in the U.S. All of its stores have been closed since March 18, and it has not decided when it will be safe to reopen.
Like Macy’s, many retailers have continued to sell online. Without brick-and-mortar locations, though, they have lost the engine that still fuels most customer purchases.
In a statement Monday, Macy’s listed the many steps it’s already taken to try to shore up its finances. It has suspended its dividend, drawn down a line of credit, frozen hiring and spending, and canceled some orders, among others. The company has also withdrawn its 2020 financial outlook.
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“While these actions have helped, it is not enough,” the company said in a statement. “Across Macy’s, Bloomingdale’s, and Bluemercury brands, we will be moving to the absolute minimum workforce needed to maintain basic operations.”
The company said it is evaluating all other financing options.
Macy’s had roughly 130,000 employees, excluding seasonal staff, as of Feb. 2. As of the latest reported quarter, the company was operating 551 Macy’s department stores, 34 Bloomingdale’s locations, 19 Bloomingdale’s outlets and 171 Bluemercury shops, according to its website.
Shares of Macy’s were up slightly in trading Monday on the news. The stock, which has a market capitalization of $1.7 billion, has lost 68% of its value since the start of the year.
Even before the coronavirus pandemic started, Macy’s and other department store chains were struggling from weak sales. With the global crisis, they’ve had to respond quickly to stay afloat. Nordstrom suspended its dividend and drew down $800 million on its revolving credit facility. Kohl’s drew its $1 billion unsecured credit facility. Kohl’s and J.C. Penney were among the companies that withdrew their financial outlook, too.
As department stores remain dark, companies may feel even more squeezed. According to an analysis by Cowen and Co., Kohl’s and Macy’s have enough liquidity for five months. J.C. Penney and Nordstrom fare a bit better and have enough cash to last eight months with their stores closed, Cowen said.
Along with furloughs, Macy’s said last week that its CEO Jeff Gennette will not receive compensation starting April 1 and until the end of the crisis. It said it would also reduce pay for the period for all executives at management director level and above.
Macy’s said it will have fewer furloughs on the digital side of its business, such as in its distribution centers and call centers. It said furloughed employees enrolled in health benefits will continue to receive coverage, with the company paying 100 percent of the premium.
“We expect to bring colleagues back on a staggered basis as business resumes,” it said.
Lauren Thomas, CNBC contributed.