Tapestry is plotting a new course of action in its fight against the coronavirus. It includes layoffs, possible furloughs — depending on when stores in North America reopen — and pay cuts across the company’s corporate division.
“With the passage of time, we are facing increasing pressure on the financial performance of the business, requiring us to make difficult decisions to ensure that Tapestry and its brands continue to thrive well into the future,” Jide Zeitlin, chairman and chief executive officer of Tapestry, said in a statement. “These decisions are balanced with numerous steps to moderate the impact of the current environment on our people.”
The fashion house, parent to the Coach, Kate Spade and Stuart Weitzman brands, announced Monday that effective Saturday, the retailer would reduce its workforce by approximately 2,100 part-time in-store associates across all three brands. Each of these associates will receive a one-time payment of $1,000 to help “reduce the financial burden,” according to a company statement.
The remaining majority of Tapestry’s North American workforce will continue to receive regular compensation through May 30. If the store closures continue into June, the retailer said it will furlough the majority of its assistant store managers and in-store associates.
In mid-March, Tapestry, like many retailers, announced temporary store closures in North America to prevent the spread of the coronavirus as it made its way around the globe. At the time, the retailer said the shutdown would be for just two weeks, or until around March 27. It later extended the closures to April 10. Now, the company said store reopenings in North America will be evaluated on a store-by-store basis.
In addition, executives — including Zeitlin — will take a pay cut amid the pandemic. Starting in the beginning of fiscal year 2021, the ceo’s salary will be reduced by 50 percent. The board of directors’ cash compensation will also be cut in half. Meanwhile. All North American corporate employees’ salaries will be slashed between 5 percent and 20 percent, depending on the salary level. Company bonuses and salary increases will also be eliminated for the year. The modifications are expected to remain in place for at least 12 months.
Tapestry said it plans to take similar measures among its associates outside of North America, but did not disclose any further details.
Last month, Tapestry freed up cash reserves by drawing down $700 million of its $900 million revolving credit facility to add to its cash balance. It also suspended its quarterly cash dividend, starting in the fourth quarter of fiscal 2020, and suspended its share repurchase program.
Zeitlin added that Tapestry will continue to reduce operating expenses and capital spend. That includes such things as canceling or delaying new store openings, reducing inventory by canceling inventory receipts for late summer and early fall, limiting the use of third-party services, decreasing rent payments and leaning into the company’s digital businesses.
In the meantime, the e-commerce sites for all three brands remain open. “We have heightened safety precautions in our distribution centers and are maintaining remote working for our corporate employees in numerous global offices,” Zeitlin said.
Stores in China have also reopened. In January, shortly after the coronavirus was first detected, Tapestry temporarily closed stores across all three brands in the region.
In response to the crisis in North America, Tapestry has donated $2 million to small businesses in New York through the Coach Foundation. Tapestry has also donated tens of thousands of face masks to hospitals in the U.S., the U.K. and Spain. And, the Kate Spade New York Foundation has donated roughly $100,000 to the Crisis Text Line fund, which provides crisis counseling to frontline workers.
“We are supporting our local communities and those on the front lines impacted by the pandemic through our respective brand foundations and philanthropic initiatives,” Zeitlin said.
Shares of Tapestry, which were trading down about 2.5 percent Monday, are down more than 51.5 percent year-over-year. The Dow Jones Industrial Average has fallen more than 9 percent during the same time.
Tapestry will report its most recent quarterly earnings on April 30, before the bell.
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