Macy's said Thursday it's laying off 3,900 corporate staffers, roughly 3 per cent of its overall workforce, as the pandemic takes a financial toll on the iconic department store chain's sales and profits.
The company said in a release that the headcount reduction will save the company $630million per year.
In February, before the virus became a pandemic, Macy's said it would cut 2,000 jobs in its corporate office and close 125 stores.
Like many of its non-essential peers, Macy's was forced to close its physical stores to curb the spread of the coronavirus, evaporating sales.
The New York-based company also furloughed a majority of its workers.
Since early May, Macy's has been gradually reopening its stores, which had been closed since March 18.
Shoppers are seen above outside a Macy's department store in New York City on Monday. The company on Thursday announced that it would lay off 3 per cent of its workforce
The coronavirus pandemic, which forced the company to shut down its stores, has taken a toll on its stock price
Macy's CEO Jeff Gennette has said that customers are coming back better than expected, but the recovery will be slow, and it needs to readjust its business to a new climate.
'While the re-opening of our stores is going well, we do anticipate a gradual recovery of business, and we are taking action to align our cost base with our anticipated lower sales,' Gennette said in a statement.
Macy's said that it has reduced its store staffing and will readjust as sales rebound.
For the three months ended May 2, Macy's Inc. reported sales of $3.02billion, the company announced earlier this month.
That marks a 45 per cent drop from the $5.5billion in the year-ago period.
The company estimated it will post a quarterly net loss of $652million, or $2.10 per share, for the first fiscal quarter.
That compares with net earnings of $136million, or 44 cents per share, in the year-ago period. Macy's reports final results on July 1.
Earlier this month, Macy's completed it debt-financing deal, raising about $4.5billion of new financing.
The company said the move will give it more financial flexibility to navigate the pandemic.
The retailer has said it plans to emerge from the pandemic as a smaller company and is considering accelerating store closures beyond what it announced.
Macy’s had in May warned of nearly $1 billion in operating losses in its first quarter and said it would turn into a 'smaller company.'
The job cuts come at a time when unemployment figures in the United States are already high.
Rising coronavirus infections in many US states including California, Texas and Florida are likely to hurt employment further as some people stay away from consumer-facing establishments.
People wear face coverings as they wait to enter the Apple Store in Glendale, California, on Tuesday. Apple is expected to close nearly a dozen stores in four states that are experiencing surges in cases of coronavirus
'Expect more layoffs akin to Macy’s to be announced in the coming months,' said Matt Fox, founder of Ithaca Wealth Management in New York.
'Retailers that were struggling before the pandemic hit will re-evaluate their operations and cut jobs out of necessity to stay afloat until the economy recovers.'
Macy’s said it has also reduced staffing at its stores, supply chains and customer support network and would adjust their levels as sales recover.
The company, which reopened its flagship Manhattan store on Monday, said it would bring back most of its remaining furloughed employees in the first week of July.
It expects the layoffs to result in pre-tax charges of about $180million in fiscal 2020.
Macy’s shares were down about 2 per cent in morning trading.
The number of laid-off workers seeking US unemployment aid barely fell last week, and the reopening of small businesses has leveled off - evidence that the job market’s gains may have stalled just as a surge in coronavirus cases is endangering an economic recovery.
The government also reported Thursday that the economy contracted at a 5 per cent annual rate in the first three months of the year, a further sign of the damage being inflicted by the viral pandemic.
The economy is expected to shrink at a roughly 30 per cent rate in the current quarter.
That would be the worst quarterly contraction, by far, since record-keeping began in 1948.
Economists do expect a snap-back in the second half of the year, though not enough to reverse all the damage.
Last week, the number of people applying for jobless benefits declined slightly to 1.48 million.
It was the 12th straight weekly drop.
An additional 700,000 people applied through a program for self-employed and gig workers that made them eligible for aid for the first time.
These figures aren’t adjusted for seasonal variations, so the government doesn’t include them in the official count.
Combining those figures, overall applications for jobless aid have edged down just 3 per cent in the past two weeks - a much slower pace than in late April and May.
'There has been no real decline in weekly claims the past two weeks,' said Julia Pollak, a labor economist at ZipRecruiter.
'There has also been no real increase in job openings. What seemed like encouraging signs of recovery in May largely stalled in June.'
A separate government report Thursday said orders for durable goods unexpectedly jumped nearly 16 per cent in May, reflecting a rebound in some business activity.
Still, the pace of orders and shipments remains far below pre-pandemic levels.
And excluding the volatile transportation category, so-called core orders rose only modestly, reflecting still-sluggish business investment.
The parent company of Chuck E. Cheese restaurants will seek Chapter 11 bankruptcy protection, in part because of the restaurants it has been forced to close as a result of the pandemic
The virus is once again squeezing companies across the economy.
Disney is postponing the scheduled mid-July reopening of its Southern California theme parks until it receives guidelines from the state.
Apple announced late on Wednesday that it would re-close seven of its stores in the Houston area, which is suffering a spike in cases.
Last week, it had said would re-close 11 other stores in four states. And the parent company of Chuck E. Cheese restaurants will seek Chapter 11 bankruptcy protection, in part because of the restaurants it has been forced to close as a result of the pandemic.
Larry Kudlow, President Donald Trump’s top economic adviser, asserted Thursday on Fox Business that the economy is rebounding quickly.
'I think the strong "V" recovery is right still there,' Kudlow said, referring to the shape of a sharp rebound on a chart.
Most private economists, though, foresee a much more tepid recovery.
And the latest economic figures coincide with a sudden resurgence of COVID-19 cases in the United States, especially in the South and West, that is threatening to derail the nascent economic rebound.
On Wednesday, the nation set a record high of new coronavirus cases.
Many states are establishing their own records for daily infections, including Arizona, California, Mississippi, Nevada, Texas and Oklahoma.
Cases of coronavirus have also jumped in Florida and Georgia. Should those trends continue, states may reimpose some limits on businesses that would likely trigger job cuts.
And if not, consumers may choose to shop, eat out, and travel less.
Texas Gov. Greg Abbott said Thursday that that state will suspend its business reopenings amid a surge in coronavirus infections.
The federal government this week reported a slight drop in the number of people filing for unemployment benefits
Real time data on small businesses suggests that the job market’s improvement slowed in June compared with May, when 2.5 million jobs were unexpectedly added.
About 78 per cent of small businesses have reopened as states have lifted shutdown orders, according to data from Homebase, a company that provides scheduling and time-tracking software to small businesses.
Yet nationally, that figure has been flat for the past week.
In states that are suffering spikes in COVID-19 cases, small businesses are closing again and cutting some jobs.
Ray Sandza, an executive at Homebase, said the plateau in business reopenings is a worrisome sign that the remaining 20 per cent of small companies could end up closing permanently.
'If you haven’t reopened yet, the likelihood of coming back is low,' Sandza said.
He noted that most small businesses had just one or two months' of cash on hand when the pandemic intensified three months ago.
In Florida, Texas, and Arizona, the proportion of small businesses that have closed has risen in the past week as a result of the resurgent viral outbreaks.
And in Arizona, as of Monday, the number of employees working at small companies was 31 per cent below the pre-pandemic level.
That's worse than the previous week, when it was 26.5 per cent.
Homebase’s data showed a solid rebound in jobs and hours worked in May that was consistent with the May jobs report, which also showed that the unemployment rate fell to 13.3 per cent from 14.7 per cent.
Those are the two highest unemployment rates since the Great Depression.
Other real-time data is showing similar results.
And shifts worked have actually fallen in 10 states in the past week, according to Dave Gilbertson, a Kronos official.Kronos, which also produces small business scheduling software, said the number of shifts worked is now growing at only half the pace it was in late April and May.
Thursday’s data on jobless claims included one bright spot: The total number of people receiving unemployment benefits aid fell to 19.5 million from 20.3 million, which suggests that employers are rehiring some workers.
For the unemployed, the federal government has been providing $600 in weekly benefits, on top of whatever state jobless aid recipients are receiving.
This federal money has pumped nearly $20billion a week into the economy and enabled many of the unemployed to stay afloat.
It has been a major help to Alexis O’Neill, who was laid off in March from an accounting job at an aviation fuel company.
O’Neill, 49, who lives with her mother in Ann Arbor, Michigan, is looking for a job that would allow her to work from home so she could avoid putting her mother at risk of contracting the virus.
She has applied for at least a dozen jobs but has received no responses except an acknowledgement of her application.
Many open jobs now seem to offer lower pay than before the pandemic struck.
Compounding the dilemma for O’Neill, Michigan is stuck with the nation’s second-highest state unemployment rate, 21.2 per cent.
'The job market is terrible," she said. 'Everything either pays so badly or doesn’t come with benefits.'
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