Coronavirus Widens Retail Divide, Leaving Macy's and Victoria's Secret Behind
May 21 2020 - 7:24AM
Dow Jones News
By Suzanne Kapner
The coronavirus pandemic is widening the divide between
retailers that are drawing shoppers and those that are losing
business, accelerating a split that had been playing out before the
health crisis forced some chains to temporarily close stores.
Department stores and apparel retailers are feeling the most
pain. Their stores were closed from mid-March through April, and
while some buying shifted online, it wasn't enough to offset the
lost sales in physical locations.
On Thursday, Macy's Inc. offered a glimpse of the damage wrought
by the virus, saying that first-quarter sales fell by as much as
45% and that it expects to record a roughly $1 billion operating
loss when it reports financial results on July 1.
Victoria's Secret parent L Brands Inc. said quarterly sales fell
37% and that it would close about a quarter of the lingerie brand's
stores in North America. And Kohl's Corp. reported a 41% drop in
sales for the spring quarter, even as digital sales increased
24%.
Macy's closed all of its roughly 775 stores on March 18. It
began reopening locations on May 4, and Chief Executive Jeff
Gennette said early results are encouraging. "Demand is moderately
higher than we anticipated," he said. "We expect business to
recover gradually."
Retail executives and analysts said the fallout from the
pandemic is likely to be felt even as life starts to return to
normal, with more states loosening restrictions and allowing
businesses to reopen.
"We will be in a fairly unprecedented period of change for some
time," Kohl's CEO Michelle Gass said. The retailer has reopened
about half of its more than 1,100 stores, but shoppers are coming
back slowly. Ms. Gass said sales at the reopened stores are about
half to a third of normal.
"As it relates to the balance of the year, we are planning the
business very conservatively," Ms. Gass said.
For the spring quarter, Macy's expects to swing to an operating
loss between $905 million and $1.1 billion, compared with a profit
of $203 million a year ago. Kohl's swung to a $541 million net loss
in the first quarter, while L Brands booked a nearly $300 million
net loss.
By contrast, big-box chains such as Walmart Inc., Target Corp.,
Home Depot Inc. and Lowe's Cos., whose stores remained opened,
experienced a sales surge, as shoppers flocked to them for food,
items for the home and other essentials.
"The big-box chains are winning new customers that will stick
around after the pandemic," Citi analyst Paul Lejuez said.
Mr. Lejuez recently surveyed 1,000 J.C. Penney Co. customers and
asked where they would shop if their local Penney closed. Roughly a
third of respondents said they would shop at Target and another
third said they would visit Walmart.
Penney filed for bankruptcy protection this month and plans to
close about 240 stores, or nearly 30% of its locations. Neiman
Marcus Group and J.Crew Group Inc. also filed for bankruptcy this
month, along with department-store chain Stage Stores Inc., as the
pandemic tipped retailers already in a weakened financial state
over the edge.
Other chains are expected to close tens of thousands of stores
in coming years as more sales shift online. Just this week, Pier 1
Imports Inc. said it would wind down its operations and permanently
close its 540 remaining stores after it can liquidate the
inventory. The furniture and housewares seller filed for bankruptcy
in February.
L Brands said Wednesday that it would close about 250 Victoria's
Secret and Pink stores in North America this year, or a quarter of
the lingerie seller's locations in the region. The company is
reeling after plans to sell a controlling stake in Victoria's
Secret to a private-equity firm were scuttled by the pandemic.
Neil Saunders, managing director of research firm GlobalData
Retail, said it isn't just health concerns that will dissuade
shoppers from rushing back to stores for nonessential purchases,
but also their pocketbooks at a time of record unemployment. More
than 36 million workers, or roughly a fifth of the U.S. workforce,
have filed for unemployment insurance since March 14.
"Even among those who are going out to shop, there has been
financial distress," Mr. Saunders said. "People don't feel
comfortable spending freely."
Given that a lot of apparel purchases are tied to
occasions--whether social events or work--and those occasions
aren't happening, there are even fewer reasons for shoppers to
visit the mall, Mr. Saunders said.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
May 21, 2020 07:09 ET (11:09 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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