With stores sidelined for the foreseeable future, Nordstrom Inc. will furlough some of its corporate staff in early April, “the most difficult decision we have made,” the retailer’s CEO said Wednesday.
As the COVID-19 pandemic has ravaged American brick-and-mortar retail throughout March, preliminary results show that online demand has failed to compensate for the business consumers ordinarily would do in stores. Acknowledging the challenges of dealing with the current macroeconomic environment, the retailer said it won’t need a fully staffed workforce to manage the “critical activities of the business at this time.”
Six-week furloughs, it added, are scheduled to begin on April 6, though the decision preserves employees’ enrolled benefits.
The move comes as Nordstrom has been carrying the full weight of store staff compensation—without any revenue coming from lights-out stores that have been shuttered since March 17. The department store company extended the closures for one week, with re-opening slated for April 5 and store personnel paid through this frame.
Nordstrom said it will continue to monitor the situation on a market-by-market basis and provide additional updates as needed. The closures impact the total store fleet across the U.S. and Canada, encompassing the Nordstrom, Nordstrom Rack, Trunk Club, Jeffrey, Nordstrom Local and Last Chance nameplates.
These store and salary decisions, CEO Erik Nordstrom said, “respond to the challenges we are facing today and to best position Nordstrom for our employees, customers and shareholders,” citing a responsibility to protect the company’s talent “while also preserving our long-term ability to offer jobs and benefits to our employees.”
Nordstrom executives will feel the austerity measures as well and give up some of their compensation in a bid to weather the health crisis. While top-level talent making up the executive leadership group will see their salaries reduced, the CEO and brother Pete, chief brand officer, will not receive a salary from April through September. No board member will receive cash compensation for a six-month period, the company said.
“We take very seriously the responsibilities we have with our people, customers and all stakeholders. We are confident these steps will help ensure the health of our company as we continue to navigate the unknown and changing environment we are facing,” the CEO said.
As the coronavirus emergency plays out with its final chapter far from written, retailers across the spectrum have been scrambling to hoard cash and whittle down expenses.
Nordstrom suspended its quarterly cash dividend beginning in the second quarter of fiscal 2020, in addition to drawing down $800 million on its revolving line of credit. It’s also targeting further cost reductions of over $500 million in operating expenses, capital expenditures and working capital on top of its initial savings goal of $200 million to $250 million. The company postponed share repurchases and has implemented efforts to realign inventory to sales trends.
It’s far from alone on this front.
Other retailers have similarly reviewed operations for cost-cutting measures to build cash reserves. Fast-fashion powerhouse H&M Group has begun laying off employees on a temporary basis, both at store level and corporate. In addition to the tens of thousands of employees who will be impacted, some layoffs could be permanent, the retail giant said, given the uncertainty surrounding how long the COVID-19 pandemic could last.
And on Monday H&M went even further, taking cost-reduction measures affecting buying, investments, rents and staffing.