The retailer, parent company to Urban Outfitters, Anthropologie, Free People, Terrain, bridal brand BHLDN and rental subscription service Nuuly, along with a food and beverage business, will begin furloughing employees April 1 for a period of 60 days. Furloughed employees, which includes in-store, wholesale and office associates, will still be eligible for benefits during this time.
“This is the first time in our 50-year history we have furloughed employees,” Richard A. Hayne, chief executive officer of Urban Outfitters, said in a statement. “It’s a painful decision that we do reluctantly. We understand the above measures are extreme, but they are unavoidable. While our company is strong and our long-term future is bright, we must take these proactive steps now to ensure the greatest degree of financial flexibility to best protect our employees, customers and shareholders.”
Urban Outfitters was one of the first to temporarily close stores across all of its brands globally on March 14, as the coronavirus continued to spread around the world. As of Tuesday, the company said stores would remain closed until further notice. While the e-commerce sites across all of the company’s fashion brands have been open during the store closures, Hayne said the drop in demand calls for a smaller workforce.
Earlier this month, Urban Outfitters said it noticed sharp declines in store traffic in some of the earliest cities hit by the coronavirus in North America and Europe, including stores in Seattle and Milan. It was unable to give guidance for the company’s current quarter as a result.
Meanwhile, Urban Outfitters’ top-line revenues improved last quarter. But it was driven by increased promotional activity, causing bottom-line profits to take a hit. Shares of Urban Outfitters are down — along with most of Wall Street — more than 52 percent year-over-year.
To help stem losses, Urban Outfitters has instituted a number of measures amid the pandemic, including freezing hiring and employee raises, reducing senior leadership compensation for the duration of the furloughs, temporarily suspending rent payments, decreasing capital spend, marketing and employee travel, and lowering its investments in growth initiatives, such as Nuuly and further expansions in China. The retailer has also borrowed an additional $220 million to further enhance its cash reserves.
“The global spread of COVID-19 is affecting every one of us and is certainly impacting Urban as well,” Hayne said. “Our efforts, as a company, have been directed at mitigating the risk to our employees and customers while trying to maintain some business so we can continue to support and pay our workers.”
Urban Outfitters is just one of many retailers to reveal furloughs this week in response to the ongoing store closures. On Monday, Macy’s, Gap, Kohl’s, the Neiman Marcus Group and Ascena Retail Group furloughed large chunks of their staffs. Victoria’s Secret parent company L Brands, Everlane and H&M set furloughs last week. Rent the Runway laid off its entire staff.
In addition, many of the retailers extended the time frame of their store closures to the end of April, the same time President Trump estimated that the social distancing restrictions in the U.S. would be lifted.