U.S. Retail Crisis Deepens as Hundreds of Thousands Lose Work

Macy’s and Gap said on Monday that they planned to furlough much of their work forces, a stark sign of how devastating the coronavirus will be for major retailers and their workers who sell clothing, accessories and other discretionary goods.

Macy’s, which said the cuts would affect the “majority” of its 125,000 workers, lost most of its sales after the pandemic forced it to close stores. Gap, which also owns Old Navy and Banana Republic, said it would furlough nearly 80,000 store employees in the United States and Canada. The announcements followed similar actions by other name-brand chains with products considered nonessential.

When a national emergency was declared earlier this month, a number of retailers announced stores would close but vowed to keep offering pay and benefits to employees for at least two weeks. As the odds of reopening stores quickly became increasingly unlikely, many extended workers’ pay into April.

But now, it appears the money is drying up. A large part of the retail industry that is not involved in selling groceries, toilet paper or disinfectant simply has very little cash coming in.

Of course, many workers, in need of jobs and unable to survive on unemployment benefits, will look to find other jobs over the next few months. As department stores and apparel sellers are shedding employees, retailers focused on food and households staples like Walmart, CVS, Kroger have said they plan to hire hundreds of thousands of additional workers to keep up with the demand for essential goods.

“The strong retailers are getting stronger, and the least strong are going to lose,’’ said Craig Johnson, president of Customer Growth Partners, a retail research and consulting firm.

But not every furloughed employee will be able to find a new position somewhere else, adding to the broader financial strain felt by many Americans.

The cuts were not limited to store employees. Gap, for example, said that it planned to reduce the number of its corporate employees around the world.

Employees in jobs that support online sales, including call center positions and distribution center roles, were largely spared from the furloughs. A Kohl’s representative said that many of its locations would continue to ship products from stores and offer curbside pickup. Kohl’s noted it had provided two weeks of pay to store and store distribution center associates and said that it would “continue to provide existing health benefits to furloughed associates at this time, and those impacted may benefit from the recently passed coronavirus stimulus legislation.”

Retailers stressed that they had already made other cost cuts before turning to their workers. Macy’s said it has decided to scale back to “the absolute minimum work force needed to maintain basic operations” after first taking actions including drawing down its credit line, suspending its dividend and halting capital spending.

Furloughed staff receiving health benefits would retain coverage through May, the company said, adding that it would cover all of the premium costs. A representative for the union representing Macy’s workers in New York City said that relatively few workers nationally use the company’s health benefits because the plan is costly.

L Brands, which is in the process of selling Victoria’s Secret in a deal that is expected to close in the second quarter, had previously suspended its dividend and drew $950 million from its revolving credit line.

The layoffs and furlough announcements are likely to continue, as many retailers owe rent payments on Wednesday. Many companies are desperately trying to conserve cash as they max out their credit lines and encounter landlords who are taking a hard line on payments.

Last week, Taubman, a large owner of shopping malls, sent a letter to its tenants saying that the company expected them to keep paying their rent amid the crisis. Taubman, which oversees well-known properties like the Mall at Short Hills in New Jersey, reminded its tenants that it also had obligations to meet, and was counting on the rent to pay lenders and utilities.

source: nytimes.com