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Penney, Neiman, Urban and Gap Escalate Fashion Furloughs

Though federal guidelines have pegged April 30 as the date when life might begin to resemble something akin to normal, retailers saddled with idled stores have no real end-game in sight. With the coronavirus pandemic still spawning a rash of cases across the U.S., and especially its new epicenter in New York City, decision-makers at the helm of the country’s commerce companies are making tough calls on how many workers they can reasonably support while the crisis ravages the economy.

And now, marquee merchants including J.C. Penney, Neiman Marcus and Gap have added thousands of staff to the lengthening list of furloughed workers piling up in the retail sector.

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. With the new federal guidelines in place, and the $2.2 trillion emergency aid program President Trump signed into law on Friday, displace workers now may be eligible for federal unemployment benefits on top of what is available at the individual state level.

Broadly speaking, retailers have either elected to furlough employees through the end of April or indefinitely as there’s little clarity on when brick and mortars could resume operations. Urban Outfitters notably elected to go ahead with a 60-day furlough beginning April 1.

Most of the retailers that are laying off their staff are doing so as furloughs, instead of an outright separation. The difference is that a furloughed worker indicates the company will keep the position open because it plans to hire back the employee when it can reopen stores and distribution centers. Most retailers are keeping their online businesses up and running, but those platforms these days need just a skeleton crew to maintain operations. And sharing in the pain, many senior executives at the retail companies are also either taking a reduction in pay or temporarily forgoing a salary altogether as the firms look for ways to prune expenses and augment their financial reserves.

Neiman and Gap–along with Ascena, Steve Madden, Urban Outfitters and Guess–join Nordstrom, H&M and others that have also begun furloughing workers. And J.C. Penney, which had already furloughed many of its associates in supply chain and logistics centers on March 20, is now adding some store employees and corporate staff to its group of idled workers.

J.C. Penney: most store staff, “significant portion” of corporate

The mass merchant will begin furloughing the majority of its store employees, as well as a “significant portion of associates” at its corporate headquarters and its Salt Lake City and Soho design offices. J.C. Penney said it had previously furloughed some associates in supply chain and logistics centers two weeks ago, and warned that “those furloughs will continue.”

“We remain optimistic about J.C. Penney’s ability to weather this pandemic. We also believe these short-term solutions will have a long-term benefit for our associates, customers and key stakeholders as we look forward to the day that we reopen our doors,” CEO Jill Soltau said.

The retailer said it plans to cover 100 percent of employee-paid premiums for the duration of the furlough. From deferring capital spend and cutting spending, to extending terms for payment of goods and services, the company said it has taken several actions to improve its cash position.

Neiman Marcus Group: 14,000 employees

Neiman will furlough most of its 14,000 workers as CEO Geoffroy van Raemdonck will not draw a salary for the month.

“We will reassess whether the store closures and corresponding furlough will continue beyond April 30th as the date approaches,” van Raemdonck said.

Gap Inc.: most store staff

San Francisco-based Gap will furlough 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.”

Ascena Retail Group: all store staff, about 50% of corporate

Ascena is implementing its furlough program across its business, including all store associates and close to half of its corporate associates, the company said. Furloughed workers will keep any existing medical benefits through the retail company.

In addition to the furloughs, Ascena said it will also institute temporary reductions in the base salaries of all corporate associates above a certain salary beginning this week, and that the base salaries of interim executive chair Carrie W. Teffner and CEO Gary Muto will be reduced by 50 percent. Reductions for other executives and corporate associates above a certain salary will range from 10 percent to 45 percent, depending on base pay.

Distribution centers remain open, but are operating at limited capacity to service the company’s e-commerce business. Ascena said it was also reducing costs, capital expenditures, inventory commitments and assessing vendor payment terms.

“In light of the current environment, we have extended the temporary store closures and will continue to reassess as information becomes available. We are taking immediate steps to reduce costs and preserve cash so that we are able to resume operations when we emerge from this crisis,” Muto said, adding, “Impacting our associates is one of the most difficult decisions we have ever had to make as an organization.”

Steve Madden Ltd.: “significant” number of staff

In a regulatory filing with the Securities and Exchange Commission this week, Steve Madden said it plans to furlough a “significant” number of its employees beginning on April 1. And those who earn over $100,000 will see a reduction in their salaries at graduating amounts. Anyone participating in the company’s benefits program will be able to retain medical coverage.

Similar to its mall competitors, Steve Madden, company founder and chief creative officer, and chairman and CEO Edward Rosenfeld will forgo their salaries. And the salaries of the firm’s top executives–such as the president, chief financial officer and merchandising chief–will see their pay reduced by 30 percent. Cash compensation due to board members also will be on hold.

Urban Outfitters Inc.: “extreme” but “unavoidable” measures

The specialty chain said temporary store closures and lower overall demand means its business requires a smaller workforce to support operations. Beginning April 1, a substantial number of store, wholesale and home office employees will be 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, Inc.: 50% of corporate staff

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 beginning on April 2. 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 reduced 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.

Christopher & Banks Corp.: all store staff, 60% of the rest

The specialty women’s chain will furlough all store associates and more than 60 percent of the balance of its workforce. Corporate employees who have been working from home for the past two weeks will continue to do so “until further notice,” the retailer said.

Corporate employees and management will receive temporary base salary reductions beginning with 20 percent and up to 50 percent for president and CEO Keri Jones, the company added.

“In response to the changing dynamics related to COVID-19, including prolonged store closures, we are taking proactive steps to conserve capital during this uncertain time,” Jones said.

Spencer’s: all store staff

Spencer’s is furloughing all store associates “until the current situation allows for their safe return to business as usual,” the company said. It also will continue healthcare benefits for those who are currently enrolled.

“At Spencer’s, we are all family, which made this decision so challenging. It’s best for all of us to be home with our love ones and ride this storm out,” president and CEO Steven Silverstein said.

The retailer said it “will be prepared for the resurgence of its stores and the shopping experience” when it can reopen its more than 650 locations.

G-III: 60% of wholesale operations, over 80% retail staff

G-III Apparel Group Ltd. is furloughing 60 percent of its wholesale operations employees, and cutting it retail segment staff by over 80 percent through furloughs and staff reductions.

“Over the years, we have successfully managed through many challenges. What we are navigating through today is unprecedented and rapidly evolving. I am confident in the actions we are taking to strengthen our financial flexibility to position us for future success…. We look forward to bringing our furloughed employees back to work as soon as possible,” Morris Goldfarb, chairman and CEO, said.

In addition, Goldfarb and Sammy Aaron, vice chairman and president, agreed to receive no salary, while others on the senior management team–Wayne S. Miller, chief operating officer and secretary, Neal S. Nackman, chief financial officer, and Jeffrey Goldfarb, executive vice president–each agreed to a 40 percent reduction in their annual salaries. Also, the base salaries of other senior staff will be temporarily reduced by 10 percent to 40 percent, depending on salary levels.

Express Inc.: most store associates and some corporate staff

The fashion retailer said it will furlough most store associates and a number of corporate associates. While Express will pause pay during the furlough period, the retailer will also continue to provide healthcare benefits for those who are eligible.

“These decisions should allow us to emerge from the current crisis in a position to continue our strategic transformation and achieve our previously stated goal of long-term profitable growth,” Tim Baxter, CEO, said.

 

 

 

 

 

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