Another week and another group of fashion companies shedding workers by the thousands.
On Monday, a trio of marquee fashion firms detailed plans to offload legions of employees in response to a coronavirus pandemic that experts believe has yet to reach its zenith in the U.S.
Capri Holdings Ltd., Ralph Lauren Corp. and Abercrombie & Fitch Co. are the latest to furlough staff, following a spate of retail downsizings that saw Macy’s sideline 130,000 and J.C Penney nearly 90,000. H&M, meanwhile, temporarily trimmed its workforce by tens of thousands.
Parent to luxury brands Michael Kors and Jimmy Choo, Capri said it will lay off 7,000 as it preps for stores to remain closed until June 1. And bucking the prevailing trend recently in the apparel retail community, Ralph Lauren will “settle payment for finished goods and goods already in production,” the company said, in line with its “responsible purchasing practices.”
Capri, which also owns Versace, expects its retail stores across North America and Europe will remain closed until June 1. Furloughs affect 7,000 North American retail store employees beginning April 11, but the luxury firm expects to re-emerge post-coronavirus with a leaner workface as it resets its business.
“The impact of COVID-19 on the world and the global economy is changing rapidly in ways we could not have anticipated,” chairman and CEO John D. Idol said.
Capri will continue to pay the employer component of company benefits, while its furloughed employees in the U.S. and Canada will be eligible for unemployment insurance and other government relief programs. The company is applying for national payroll subsidy programs in various countries across Europe to further reduce payroll expense.
“We believe that these actions are necessary in order to enable us to overcome the burdens of this financial crisis,” said Idol, describing the pandemic as a “very challenging time. “We continue to believe in the power of our three fashion luxury brands and resiliency of our company to navigate these extraordinary times.”
Following a playbook similar to others in fashion and retail, Capri said it’s pruning pay in the C suite and on the board, which will see compensation halved for the near term. All three creative chiefs—Michael Kors, Donatella Versace and Sandra Choi—plus Idol have voluntarily elected to forgo their salaries for fiscal 2021. Other employees could take a hit to pay as well. Capri said it is also considering a reduction in “overall salaries at various levels throughout the organization by approximately 20 percent.”
The company’s cost-cutting initiatives don’t end there.
Capri also is managing inventory purchases, given anticipated decreased demand in the second half of the fiscal year by reducing or canceling commitments, as well redeploying inventory and consolidating upcoming seasons. And the company is working with its partners to extend the terms of its future payables, as well as working to secure relief of certain payables due now to maintain financial flexibility for the long term.
Describing the effects of the COVID-19 crisis as “profound and wide-reaching,” Ralph Lauren, executive chairman and chief creative officer of his eponymous empire, said, “For more than 50 years, we have embraced the idea of timelessness—focusing on what lasts.” That “guiding principle,” he added, equips the company to “not only endure this crisis, but thrive again for years to come.”
For now, though, some of the company’s workers are in for a rough ride. Starting April 12, all store employees where retail operations have been suspended, as well as those whose jobs are not conducive to continued remote working, will be placed on unpaid temporary furlough, the company said on Monday.
“This includes the majority of our store employees and a portion of our corporate employees in North America, Europe and select other parts of the world,” the company said, adding, “Our hope is to bring back our employees back to work as soon as it is safe and practical.” Corporate employees are those who support the company’s store base, such as in creative services or facilities. The plan leaves furloughed employees’ employee benefits intact.
Salaries and compensation will shrink for the near term. In addition to Lauren forgoing his entire salary for fiscal 2021 as well as his fiscal 2020 bonus, president and CEO Patrice Louvet will receive half of his salary during the crisis. Others among the 140-members executive and global leadership team will receive salaries reduced by 20 percent for the first quarter of fiscal 2021. Board members will not receive their quarterly cash compensation for Q1 of fiscal 2021. Salary reductions will be contributed to Ralph Lauren’s Employee Relief fund, which provides grants to employees facing special circumstances and financial hardships during this time, the company said.
“Understanding that the scale of the ongoing slowdown of future orders can have a significant impact on our partners’ liquidity, we have a vendor payments program in place which enables suppliers to receive payments on a shortened time frame at favorable market rates,” the company said. “Over the long-term, we are committed to partnering with peers, non-governmental organizations and governments to advocate and generate new sources of support and long-term job security for factory workers, while strengthening the resilience of business in the countries in which we manufacture our products.”
Separately, the company has also been working to leverage the talent of its employees by reassigning them across other areas of the business, moving them to high-need functions directly involved in managing urgent business needs and continuity, as well as its ongoing efforts to manufacture medical supplies, including masks and gowns, for donation.
“We have overcome many challenges over the last 53 years because the purpose and values of our company have guided us and enabled us to come out stronger on the other side,” the company said. “They are our compass in this moment too, as we make tough decisions in the short-term to position us for continue long-term strength–as a company, a leader in our industry and an employer with thousands of people around the world.”
Abercrombie & Fitch Co.
The specialty retailer’s store associates will be furloughed starting April 12, Abercrombie said, as stores in North America and in the Europe, Middle East and Africa regions remain temporarily closed to staunch the spread of COVID-19. Abercrombie, which declined to disclosed the exact number of employees impacted by the furloughs, will continue to fund the health premiums for eligible associates who are temporarily laid off.
Separately, the teen retailer will also implement a temporary reduction in work schedule, and corresponding reduction in pay, for about 15 percent of its corporate associates, globally. These staff members are those who are not able to operate at full capacity in the current business climate.
“The company will make every effort to bring its store associates back to work, and its corporate associates back to a full schedule, as soon as possible,” Abercrombie said.
Abercrombie will also reduce salaries, ranging from 10 percent to 33 percent, from the vice president level upwards, including all members of its executive rank and the CEO. Members of the board of directors also will see their cash retainer temporarily reduced by 50 percent. Spring merit raises and promotions also have been canceled, the company said.
“Given the evolving environment, we are undertaking a range of additional expense management actions to further strengthen our financial position…. We are committed to preserving our team’s ability to respond quickly to the rapidly evolving conditions, while serving the needs of all of our stakeholders, and positioning us to return to growth after the COVID-19 pandemic,” Fran Horowitz, said.