The company said it will keep “the absolute minimum workforce” for streamlined operations, with a focus on its digital business, distribution centers and call centers. Furloughed employees will continue to receive health insurance at least through May. Macy’s said it expects to bring back employees “on a staggered basis as business resumes.”
The New York-based retailer said it has taken significant steps to stem the financial fallout in recent weeks. It has canceled orders, implemented hiring and spending freezes, and suspended payouts of its dividend. It also has delayed bonuses and 401(k) matches, and says executives will take temporary pay cuts beginning in April. Jeff Gennette, Macy’s chairman and CEO, is forgoing pay until the crisis subsides.
Industry experts said Macy’s announcement was likely just the beginning of widespread layoffs and furloughs by major retail chains as they come to grips with what could be months of store closures.
“The floodgates are wide open,” said Mark Cohen, director of retail studies at Columbia Business School and the former chief executive of Sears Canada. “Now that the pipe dream of an Easter opening is over, companies are trying to figure out how to protect their ability to come out of this when it’s all over, whenever that might be.”
President Trump on Sunday extended social distancing guidance through April 30 and backed off his earlier hopes that the country would be “opened up” by Easter, adding that U.S. deaths from the outbreak will likely peak in two weeks. Just before Trump’s comments, the nation’s top infectious diseases experts, Anthony S. Fauci and the White House’s coronavirus response coordinator, Deborah Birx, told Trump that the country could see up to 200,000 coronavirus-related deaths.
Macy’s was already on shaky ground before the coronavirus outbreak. In February, it announced it would close 125 stores — about a fifth of its total — and lay off about 2,000 workers after a disappointing holiday season.
“Companies like Macy’s that didn’t have a lot of momentum in the first place are at the most risk,” he said. “Macy’s, which was not on the brink but was heading there, is now standing at the edge of the abyss, and these types of furloughs are only going to become even more widespread.”
From tourism to retail to white collar jobs, workers nationwide are facing an unprecedented wave of layoffs, furloughs and pay cuts as entire industries come to a virtual standstill. Last week, Labor Department data revealed a record 3.3 million Americans who had applied for unemployment benefits the week before. And economists say more than 40 million Americans could lose their jobs by mid-April.
Retailers like Macy’s have struggled for years to get more shoppers into their stores, but those efforts have ground to a halt in recent weeks. Thousands of stores have temporarily closed as local governments issue shelter-in-place orders for millions of Americans. Macy’s struggles, analysts said, are likely to reverberate throughout the retail industry: The chain is an important anchor for hundreds of shopping malls around the country, which means every move it makes has lasting impacts for a number of smaller retailers and mall operators.
Foot traffic at retail stores has largely vanished, and the retail sector is likely facing “broad store and mall closures … as the nation works together to flatten the curve,” Cowen’s Oliver Chen wrote in a not to clients on Monday.
Macy’s, he and colleagues said, has enough cash to survive about four and a half months of store closures. They estimated that the retailer spends about $227 million a month on workers’ paychecks, with about half of that going to its 100,000 store employees.
As the pandemic wreaks economic havoc around the globe, the U.S. government is preparing to send checks or direct deposits to most Americans. As part of bipartisan legislation ushered through Congress and signed by Trump, the government’s coronavirus stimulus would provide $1,200 payments to adults with annual incomes up to $75,000, plus an additional $500 per child. For most people, the boost will likely arrive in April via direct deposit.
But analysts say those checks will do little to turn around the fortunes of most retailers. Consumer confidence has taken a massive hit as millions lose their jobs and health insurance. When people do spend, analysts say, it’s likely to be on necessities like rent and food — not discretionary items like clothing and shoes.
“I don’t suspect many people are in the market for spring fashion right now,” said Cohen of Columbia Business School. “There is no telling when this is going to end."