Despite the number of retail workers out of work or on furlough, the sector isn’t dead—it’s just evolving to reflect the categories that consumers are focused on.
Nowhere is that more evident than at traditionalbrick-and-mortar ope rations that have relied primarily on in-store traffic. Bed Bath & Beyond Inc. is one such example.
The big box home goods retailer on Wednesday said it has cut 2,800 jobs to realign its organizational structure, a move that’s effective immediately and will help Bed Bath & Beyond generate future annual pre-tax cost savings of $150 million. The reductions are part of a plan disclosed earlier this year to improve annualized EBITDA of between $250 million to $350 million, excluding one-time costs, over the next two-to-three years. In July it shuttered 200 stores.
The changes and savings will help shift investment to new strategic growth plans that will enhance the “omni-always shopping experience in store and online” approach started with the recent introduction of buy online and pickup in store and curbside pickup services, the company said. The headcount reductions are across its corporate headquarters and retail stores, and will also “reposition field operations to better serve customers in a digital-first shopping environment, as well as realign technology, supply chain and merchandising teams to support strategic growth initiatives,” Bed Bath & Beyond added.
“Saying goodbye to colleagues and friends is incredibly difficult, but this component of our comprehensive restructuring program is critical to rebuild the foundation of our business, construct a modern, balanced and durable business model, and meet the structural shift in customer shopping and service preferences that we have seen accelerate as a result of COVID-19,” Mark Tritton, CEO, said. Tritton, the former chief merchant at Target Corp., joined the home goods retailer in November.
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Tritton’s not the only one who’s pivoting and upping the ante on digital. Also on Wednesday, Chico’s FAS Inc. reported a wider second quarter net loss versus year-ago figures, and said it was leaning into learnings on the digital side after having been shut down for weeks due to the coronavirus outbreak. Interim chief financial officer David Oliver told Wall Street that the company is also taking a closer look at its store network and will likely cut more doors.
Retailers such as Macy’s Inc. shed 3,900 jobs in its realignment, and Nordstrom Inc. has already cut headcount and shut 16 full-price stores and its Jeffreys concept.
A study by UBS on the retail sector says it expects 100,000 stores will close by 2025. That’s based on an assumption that online penetration rises to 25 percent by then. While hardline and food stores saw an increase of 480 doors to 193,200 stores as of June 30, the biggest contributors to store growth have been the discount and dollar channel at up 1,560 stores and in home improvement at up 180 locations, according to UBS retail analyst Michael Lasser.
“On the other hand, the biggest contributors to store closures have been home furnishings [at down 820 stores] and sporting goods [down by 270 store closures]. Within softlines, there’s been a 4,760 decline in total stores to 100,500,” Lasser said, adding that off-price was the biggest contributor to growth after adding 100 stores. Men’s and women’s apparel stores shed 2,390 locations, as jewelry and accessories retailers lost 950 locations and footwear companies axed 480 stores.
Lasser believes more store closures, and hence more job losses, are afoot on the apparel retail front as consumers shift wallet share to home and sporting goods, but noted that even they too could see pressure at some point when conditions change and spending reverses course.
So where are consumers spending now?
Grocery chain Lidl plans to add 50 new stores along the East Coast and create 2,000 new jobs by the end of 2021. The company said on Wednesday that it plans to invest over $500 million in the new stores.
Albertson’s, another grocer, is hiring 50,000 people, while Amazon said it has 175,000 positions open in its fulfillment centers and delivery network. And Instacart is looking to hire 300,000 contract workers as it looks to expand delivery services.
That means that right now working and sheltering at home—along with expectations for same-day or quick one- or two-day deliveries—remain top of mind for consumers as COVID hangs around for the immediate future. That’s a boon for food and essentials, but perhaps leaves little left in discretionary spending on apparel and footwear for the 10 million who are still unemployed as a result of COVID-19.