The department store said it has lost the majority of its sales because of the coronavirus crisis.
The coronavirus nightmare is only getting worse for Macy’s.
The department store chain said on Monday that it was keeping its stores closed until further notice and would furlough most of its 130,000 employees starting this week as the pandemic’s outbreak continues to batter its business.
“We have lost the majority of our sales due to the store closures,” Macy’s said in a statement, noting that staffing will be kept at the levels of “the absolute minimum workforce needed to maintain basic operations.” Macy’s, which also owns Bloomingdale’s and Bluemercury, gets about 25% of revenue online and noted that its online teams would see proportionally fewer furloughs.
A Cowen & Co analysis of Macy’s finances last week estimated the company’s monthly labor costs were $227 million (about evenly split between stores and corporate offices) and that the company had enough cash to withstand five months without revenue from stores.
The company closed its stores on March 18 and had hoped to reopen them on Tuesday, but they will remain closed until “we have clear line of sight on when it is safe to reopen,” Macy’s said.
Across the country, many state and local governments have ordered nonessential retailers to close in the hopes of curbing the spread of the virus, while many malls have shuttered too. On Sunday, President Trump extended the voluntary shutdown through April 30.
In the past two weeks, Macy’s has taken steps to shore up its liquidity, such as halting dividends and share buybacks and tapping its line of credit, as well as working with vendors to cancel some orders and negotiate new terms. But the situation has become dire: Macy’s has had to do more, given the alarming drop in revenue.
Even at a company like Target, which is open for business, sales of clothing and accessories like shoes fell 20% this month, as shoppers have focused on essentials rather than the fashion items that are Macy’s bread and butter.
The crisis comes at a fraught time for Macy’s and adds to an already painful attempt at reinventing itself: Last month it announced a turnaround plan that included laying off 2,000 corporate office workers (10%) and closing 125 namesake stores (20%).
The company suffered the indignity of having its corporate debt downgraded last Thursday by Moody’s Investor Services because of the disruption brought on by the virus and its impact on Macy’s already wobbly balance sheet.
Still the largest U.S. department store company despite its problems, Macy’s saw comparable sales fall 0.8% last fiscal year, suggesting continued market losses. The company had initially expected sales by that metric to fall between 1.5% and 2.5% as it implemented its turnaround, but it has withdrawn that forecast due to the uncertainty in its business.
Macy’s said in early February it planned to reinvent several of its own store brands with ambitions to make them billion-dollar labels. It also unveiled a new prototype store in Dallas about one-eighth the size of a regular Macy’s more focused on trendy clothes and serving food. But with its increasingly compromised finances, any project requiring capital investments is now threatened.
The growing doubts about Macy’s prospects have slammed its shares, which are down 79% from their levels a year ago.
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