NEW YORK (AP) — Macy's says it will stop paying tens of thousands of employees who were thrown out of work when the chain closed its stores in response to collapsing sales during the pandemic.
The majority of its 130,000 employees, including stock people and sales clerks, will still collect health benefits, but the company said that it is transitioning to an "absolute minimum workforce" needed to maintain basic operations. Macy's has lost the bulk of its sales due to the temporarily closing of all 500 of its stores starting March 18.
The move is perhaps the most dramatic sign that even big name retailers are seeing their business evaporate and that the $2 trillion rescue package passed by Congress and signed by President Donald Trump last week may have come too late for some.
Nordstrom said last week it was furloughing a portion of its corporate staff. And shoe company Designer Brands Inc., which operates DSW Designer Shoe Warehouse, furloughed 80% of its workers, effective this past weekend. Analysts expect more furloughs to come as retailers won't be able to pay their employees as cash reserves run lower.
The furlough of workers will have negative consequences for an economy in which the retail industry supports one out of four workers.
“This could push us further into a damaging recession that will last longer than the duration of the crisis," said Neil Saunders, managing director of GlobalData Retail.
More than 190,000 stores, including J.C. Penney and Neiman Marcus, have temporarily closed, accounting for nearly 50% of the U.S. retail square footage, according to Saunders. Discounters, grocers and wholesale clubs that sell essential items like groceries, on the other hand, have remained open, though they have their own challenges of keeping up with shoppers who continue to stockpile.
When announcing the temporary closures, most retailers said they would keep paying their workers but they were looking at a two-week timetable. That moment has now passed and the furloughs have become increasingly necessary as the coronavirus rapidly spreads and forces people to stay cooped up in their homes.
The big question is how much of these furloughs will lead to permanent layoffs. Swedish retailer H&M said earlier this month that it may be forced to permanently layoff some its employees after temporarily shuttering 3,441 of its 5,062 stores globally.
Macy's said that there won't be as many furloughs in its online operations, which continue to operate.
Macy's said those who are enrolled in health benefits will continue to receive coverage with the company covering 100% of the premium.
“We expect to bring colleagues back on a staggered basis as business resumes," the company said.
To survive in the meantime, Macy's has suspended its dividend, drawn down its line of credit, frozen hiring and spending, and cancelled orders. It said is now evaluating all financing options.
Companies Mentioned in This Article
10 Buy and Hold Stocks to Add to Your Portfolio
“Set it and forget it” are words many investors don’t want to hear. Even the most venerable brokerage houses are encouraging their clients to actively trade so they can beat the market. Buy and hold is a relic, they say. It doesn’t reflect the reality of today.
In other words, “this time it’s different”.
As the ongoing volatility in the market shows you, it’s not different. It’s not even close to being different. The simple fact is that many active traders lose money by being too aggressive and too active for their own good.
And while it’s true that the market won’t always be this choppy, and certain stocks may be a great buy in months to come, right now investors are looking for safe harbors. One of the safest ways to invest is to find stocks that you can feel comfortable holding on to even in the worst of times. Frequently that can be because the stocks offer an attractive dividend. But sometimes, it’s also because they are in a market that is always in demand.
But that doesn’t mean you have to limit yourself to defensive stocks. You can find some quality buy-and-hold stocks that offer some attractive growth prospects.
View the "10 Buy and Hold Stocks to Add to Your Portfolio".