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US department stores Macy’s and Kohl’s stop paying workers 

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Via Financial Times

Tens of thousands of US retail employees were told on Monday that they would be temporarily laid off, as major chains moved to reflect that movement will continue to be restricted across the country for longer than previously expected.

The department store group Macy’s said it was putting most of its 125,000-strong workforce on a leave of absence without pay as stores remained closed.

Rival Kohl’s also said it would also temporarily furlough store and distribution centre workers, as well as some corporate office staff. It employs about 122,000 people.

The twin announcements on Monday underscored the mounting toll from the pandemic on the retail sector. Victoria’s Secret parent L Brands, which has about 94,000 employees, said on Friday that most of its store workers would be put on leave without pay.

The US labour market is rapidly deteriorating as stay-at-home rules to curb the spread of Covid-19 brings sectors including hotels, restaurants and entertainment to a standstill. US jobless claims earlier this month surged the most in a single week since records began in 1967, to 3.3m.

Several retailers including American Eagle, Dick’s Sporting Goods and Neiman Marcus said in immediate response to the coronavirus shutdowns that they would keep paying workers for a few days at least.

Originally, Macy’s and L Brands were also among the companies that said workers would continue to be paid. However, both have now warned that the restrictions on movement across the US meant they would have to keep stores closed for longer than planned.

Macy’s, which also owns Bloomingdale’s, said on Monday it would be “moving to the absolute minimum workforce needed to maintain basic operations”. The group, whose outlets have all been closed for 10 days, said it was unclear when it would be safe to reopen as it warned the outbreak was taking a “heavy toll” on the business.

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Unions were critical of the move. Macy’s “needs to do much more for its employees than what they have announced so far”, Stuart Appelbaum, president of the retail, wholesale and department store union, said in a statement. “They will be judged in the future by how they treat their employees now.” As of last year, only 7 per cent of the company’s workers were represented by a union.

Macy’s has already suspended its dividend, drawn on a line of credit and stopped capital spending to shore up its finances, but it said that “while these actions have helped, it is not enough”. The company also said it was “evaluating all other financing options”.

The company said there would be “fewer furloughs” in its ecommerce business, which remained open, as well as distribution hubs and call centres that support its online operation.

L Brands said it would make “every effort” to bring the workers “back to work as soon as possible”, while Macy’s said it expected “to bring colleagues back on a staggered basis as business resumes”.

As well as the temporary lay-offs, L Brands, which also owns PINK and Bath & Body Works, is suspending its dividend and cutting capital spending. The company added it had $2bn in cash, which it said should provide it “with sufficient current liquidity”.

Workers at both companies affected by the changes would continue to receive healthcare coverage.

Kohl’s chief executive Michelle Gass said on Monday the decision to furlough staff was “incredibly difficult”, adding: “We look forward to the day that we can reopen our stores to welcome our associates back.”

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