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Furloughs Sweep Across US Denim Retail

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Denim retailers are saddled with idled stores and have no real end-game in sight. With the coronavirus pandemic still spawning a rash of cases across the U.S., decision-makers at the helm of the country’s retailers are making tough calls on how many workers they can reasonably support while the crisis ravages the economy.

Promises to pay store staff during what were expected to be 14-day closures have shifted in recent days into headcount reductions and salary freezes. The latest report from the U.S. Labor Department brings the total to 16 million for the past three weeks alone, signaling the terrible toll the coronavirus pandemic has exacted on the American economy.

Though sales in China are recovering, on Tuesday Levi Strauss & Co. said it plans to furlough all of its U.S. retail store employees and merchandise coordinators in wholesale until it is safe for them to return to work.

“All employees will continue their access to unemployment insurance, benefits such as our Employee Assistance Program (EAP) and emergency financial assistance provided by the Red Tab Foundation. Retail employees who have healthcare benefits with the company will also retain these benefits during the furlough period,” the company stated.

Additionally, the company has implemented temporary salary reductions at the top of the organization including the CEO, board, global leadership team and all executive employees.

San Francisco-based Gap has furloughed the majority of its store teams in the U.S. and Canada. Like its retail competitors, workers on furlough will retain their company benefits, but won’t receive their paychecks. Gap said it is also reducing headcount across its corporate departments around the world as the entire Gap leadership team, along with its board of directors, will also absorb a temporary pay cut.

“After taking the extraordinary measures of temporarily closing all of our company-owned stores in North America and Europe two weeks ago, we are now in a position where we must take deeper actions,” Sonia Syngal, president and CEO, said. “We know that tens of thousands of people rely on us to support themselves and their families, and that millions more around the world rely on our business. We are doing everything we can to provide support during this time, and we are intensely focused on welcoming back our store teams and customers as soon as we are able.”

American Eagle Outfitters has begun to furlough an unspecified percentage of its associates without pay across various departments including store, corporate and field employees. The teen specialty retailer will continue paying 100 percent of health insurance premiums for these individuals “at least” through the end of April.

PVH Corporation, the parent company of Calvin Klein and Tommy Hilfiger, announced that 75 percent of the company’s North American workforce–including office, warehouse and store employees–would be furloughed or see their hours slashed.

“We are doing everything in our power to best position PVH for long-term stability, while considering the impacts to all of our key stakeholders,” Manny Chirico, the company’s chairman and CEO, said in a statement. “We have been forced to take proactive steps to reduce our expenditures and preserve our cash position.”

“While this is requiring difficult short-term decisions, we are confident that our actions will lead us to a stronger future,” he added.

The specialty chain Urban Outfitters said temporary store closures and lower overall demand means its business requires a smaller workforce to support operations. As of April 1, a substantial number of store, wholesale and home office employees were furloughed for 60 days, although they will continue to receive company benefits that they were enrolled in before the slated furloughs.

The company also is suspending hiring, eliminating bonuses for fiscal year 2021, and delaying all merit raises. In addition to borrowing $220 million to protect its cash reserves, Urban has reduced its capital budget by more than $100 million, either through delaying or canceling projects, and has pared senior leadership compensation, among other cost-cutting initiatives.

“We understand that 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,” CEO Richard A. Hayne said.

Guess said it is mitigating the operating and financial impact from the COVID-19 pandemic, which includes a decision to furlough all U.S. and Canadian store employees. The company will continue to fund health insurance premiums during the furlough for all eligible associates. The company said it will also furlough 50 percent of its corporate associates in the U.S. and Canada, and most of its staff at distribution centers in the two countries.

On top of these measures, Guess will begin tiered salary reductions for all management-level corporate employees in the U.S. beginning at 15 percent up to 70 percent for CEO Carlos Alberini and chief creative officer Paul Marciano. Annual merit increases will be deferred, and Guess is cutting other costs, such as store occupancy costs, capital expenditures and inventory purchases. To ensure financial flexibility, Guess has drawn down about $212 million under certain of its credit facilities.

“We will make every effort to bring our team members back to their jobs as soon as we possibly can,” Alberini said.

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