Major Retailers Furlough Employees

Some of America’s most prominent publicly traded retailers announced that they would furlough bricks-and-mortar employees as the economy has frozen due to stay-at-home orders to stop the spread of the coronavirus.

The legacy department store Macy’s Inc. announced on March 30 that it would furlough most of its 125,000 employees beginning April 1. On March 17, the New York–headquartered retailer announced it would temporarily close its 775 Macy’s, Bloomingdale’s, Bluemercury, Macy’s Backstage, Bloomingdale’s the Outlet and Market by Macy’s stores beginning March 18 in an effort to help contain the spread of the coronavirus, initially anticipating that stores would remain closed until March 31. In its March 30 press release, the company announced that its bricks-and-mortar stores would remain closed until they could reopen safely, but the digital side of the business would be operational.

Monday’s announcement revealed that furloughed employees would receive neither salary nor hourly wage compensation, but participating workers would remain covered by their health benefits “at least through May.” While employees who work at the director level and above would experience a payment reduction effective April 1, the company said it would continue its policy announced March 25 that stated chairman and Chief Executive Officer Jeff Gennette would not be compensated. On March 30, it announced that members of the board of directors also would receive no cash compensation.

On May 30, the San Francisco–headquartered specialty retailer Gap Inc. announced that it would furlough the majority of employees for its bricks-and-mortar stores in America and Canada. It runs more than 2,780 stores under the nameplates of Gap, Banana Republic, Old Navy, Athleta and Intermix.

Sonia Syngal, Gap Inc.’s chief executive officer, said that the entire Gap leadership team would take a temporary pay cut. However, the sum of the pay cut was not disclosed.

“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,” she said. “Each decision, however difficult, has been made to ensure that we build toward a future where Gap Inc. can come out of this stronger—for our customers, our shareholders and, most importantly, our teams.”

Gap Inc. set up an employee resource center where furloughed company workers could get leads on temporary retail jobs.

Recent plans for furloughing employees were also announced by major retailers including J.C. Penney Company, Inc., Ross Stores Inc., Guess, Inc., Neiman Marcus Group, Nordstrom Inc., Tilly’s Inc. and Kohl’s Corp.

The Irvine, Calif.–headquartered Tilly’s furloughed all non-management store associates and some of its corporate office staff, according to a March 27 statement. It also furloughed staff working in its distribution center in Irvine; however, Tilly’s e-commerce staff continues to operate on split shifts. Hezy Shaked, Tilly’s executive chairman and chief strategy officer, said that he would forgo his salary. Ed Thomas, Tilly’s president and CEO, will forgo his salary during April and will join his company’s management team in taking a temporary pay cut.

Kohl’s CEO Michelle Gass said that she’d work without salary when her company’s retail employees are furloughed. However, the company is still delivering goods through its digital channels. It also announced that it would introduce a curbside pickup service at a majority of Kohl’s stores starting April 2.

According to the United States Department of Labor report on weekly claims that was issued April 2, the advance figure for seasonally adjusted initial claims during the week ending March 28 was 6,648,000, which is an increase of 3,341,000 from the previous week’s level. In California, the state’s Employment Development Department reported 878,727 unemployment-insurance claims for the week ending March 28. Claims for the week ending March 21 were reported at 186,333. According to Dominica Anderson, partner and team lead for fashion, retail and consumer-branded products at law firm Duane Morris LLP, much uncertainty remains regarding the future of brands in the apparel industry.

“When you look at the financial impact, I’ve read that reports show some companies are self-reporting that they may take up to a 15 percent hit, others are speculating they will have an 85 percent reduction in profit. Those are pretty big swings,” she said. “In the near future, we’re going to see a larger number of the unemployment applicants from the fashion industry.”