Glee over stores reopening around the country has quickly deteriorated into deepening concerns over spikes in national unemployment figures and coronavirus cases and massive Macy’s cutbacks, all reported this week.
Macy’s is cutting 3,900 corporate and management jobs to save $365 million this year and about $630 million in expenses on an annual basis going forward, the retailer disclosed Thursday morning.
That disclosure came on top of last February’s when Macy’s announced 2,000 job cuts, 125 store closings and the shuttering of its dot-com headquarters in San Francisco and corporate offices in Cincinnati, which would be consolidated into other facilities. Through those reductions, Macy’s anticipates $1.5 billion in annual savings by 2022. Macy’s has acknowledged that more than 125 store closings are likely.
On Monday, Macy’s Herald Square, Bloomingdale’s, Saks Fifth Avenue and other New York City stores reopened in “phase two” of restarting the local economy, following reopenings in most of the rest of the country.
But signs of progress by retailers hoping to recover some lost business due to COVID-19 have suddenly been mitigated by increasing health concerns. New coronavirus cases around the country topped 45,000 on Wednesday, setting a record for a single-day increase in the U.S. States such as Texas, Florida, California and Arizona have all seen spikes in COVID-19 cases. It’s believed some localities restarted their economies too quickly and saw many people not wearing masks and social distancing. On Thursday, Texas Gov. Greg Abbott put a pause on any further reopenings, though firms already back in business could continue to operate under the state’s health guidelines.
Compounding concerns was the government’s report that an additional 1.48 million Americans filed for unemployment benefits last week, somewhat more than the 1.35 million that were expected to file.
On the brighter side, New York, New Jersey and Connecticut have been able to contain the virus spread. But these states are now requiring that visitors from other states reporting significant increases in coronavirus cases must quarantine themselves for two weeks.
Apple, as of Thursday, has re-closed 18 stores in Texas, Florida, North Carolina, South Carolina and Arizona, over the past week or so.
Apple’s decision to once again temporarily close certain stores could trigger a chain reaction where other “nonessential” retailers also re-close stores in coronavirus “hot spots.” Disney has decided to delay reopening its California theme parks to an undetermined date past July 17.
Gap Inc. did not disclose any re-closings but a spokeswoman said, “We are monitoring very closely and will adjust business operations to ensure the safety of our customers and associates.”
“We are closely monitoring the current situation in states where COVID-19 cases are rising and will adjust business operations if necessary to ensure the safety of our customers and associates,” said Jim DePaul, executive vice president of stores at J.C. Penney Co. Inc. “We are constantly reviewing our store safety protocols. And today, we met with store leadership to reiterate the importance of adhering to the reopening playbook.”
Saks Fifth Avenue said it had no immediate plans to re-close any stores. “The health, safety and well-being of our associates and customers is always of utmost importance,” a spokeswoman said. “We’re closely monitoring the situation in all of our markets and conducting analyses, which take into account the expertise of local government and health officials. While we have no immediate plans to close stores at this time, we are prepared to act swiftly and take necessary precautions to protect our associates, customers and communities.”
In response to whether Macy’s planned to re-close any of its department stores, a spokeswoman said: “We’re following all CDC and local/state guidelines.”
Macy’s latest cutbacks, revealed Thursday morning, represent another dramatic response to the impact of COVID-19 and the challenges the retailer has been experiencing long before the outbreak of the virus. Macy’s has long been saddled with many weak stores, to a large degree stemming from its acquisition of May Co. in 2005. But the business has also been hurt by stronger competitors, notably Target, Nordstrom, Amazon, Zara and TJX Cos. Inc. Macy’s also needs to fill two key vacancies, the president’s slot and a permanent chief financial officer.
The $24 billion retailer temporarily closed all of its stores on March 18 and gradually began reopening locations beginning May 4. Most remaining furloughed colleagues are due to begin returning to work July 5.
Discussing the latest downsizing affecting almost 4,000 workers at the corporate, stores, customer service and supply chain levels, Jeff Gennette, chairman and chief executive officer of Macy’s Inc., said, “COVID-19 has significantly impacted our business. While the reopening of our stores is going well, we do anticipate a gradual recovery of business, and we are taking action to align our cost base with our anticipated lower sales. These were hard decisions as they impact many of our colleagues. I want to thank all of our colleagues — those who have been active and those on furlough — for helping us get through this difficult time, and I want to express my deep gratitude to the colleagues who are departing for their service and contributions. We look forward to welcoming back many of our furloughed colleagues the first week of July.
“We know that we will be a smaller company for the foreseeable future, and our cost base will continue to reflect that moving forward. Our lower cost base combined with the approximately $4.5 billion in new financing will also make us a more stable, flexible company,” Gennette said. The company recently reported that it raised $4.5 billion in financing, providing cushioning to navigate through the pandemic.
For fiscal 2020, the company expects pre-tax costs of about $180 million for these restructuring activities, the majority of which will be recorded in the second quarter and all of which will be in cash.
In its preliminary first-quarter report, Macy’s posted a loss of $652 million, or $2.10 a share, compared to profits of $137 million, or $0.44 share, in the year-ago quarter. Net sales amounted to $3.02 billion, versus $5.5 billion in the year-ago quarter.
The adjusted net loss was $630 million, compared to an adjusted net profit of $137 million in the year-ago period. The loss last quarter from operations was $969 million, versus an operating profit of $203 million in the 2019 period.