FROM THE DESK OF DEBORAH WEINSWIG                                                                                                             

Retail Stores Cautiously Start To Reopen US retailers began announcing temporary store closures en masse in mid-March 2020, and by the end of the month, major retailers had closed nearly 69,000 stores. Many US consumers were sheltering in place or furloughed but were left with few opportunities to shop even if they were so inclined. However, US retail is now seeing the mass shutdown of stores begin to lift as several states relax their lockdowns, allowing some malls and retailers to cautiously reopen. Permission from individual US states is the major determining factor in the reopening of retail, with each state having considerably varied approaches to lifting their restrictions. Many states started reopening in late April, and many more in early May. At the time this report is published, our Coronavirus Tracker counts 22 states open, although many retailers are only permitted to offer pickup and delivery services, not in-store shopping. While New York State remains on the closed list, Governor Cuomo offered a ray of hope on May 4 when he confirmed that some areas are already meeting five of the seven criteria that each of the state’s 10 regions must meet before restrictions are eased. In addition, he outlined a phased approach for reopening once these requirements are satisfied: Stage one allows limited retail (with curbside pickup), and stage two calls for all retail to reopen. In the interim, many retailers have experimented with new delivery models. For example, contactless curbside pickup services are being offered by Dick’s Sporting Goods and Best Buy—and the latter plans to reopen stores in early May, operating an appointment-only model. Macy’s quietly tested curbside pickup in three locations—California, Florida and Texas—in April and had established curbside pickup at 20 locations by the end of the month. The company’s store-reopening plan called for 68 stores to resume operations on May 4 in states that had relaxed restrictions, with another 50 stores set to reopen on May 11. Macy’s hopes to open roughly all 775 stores within six weeks. While some stores will technically be open, the shopping process will be markedly different. For example, Macy’s is implementing new hygiene rules for employees and customers to follow, as well as wellness checks for staff. Costco will require customers to wear face masks; beauty consultations will be no-touch; there will be a small number of frequently sanitized fitting rooms; and cashiers will work behind plexiglass barriers. These measures will supplement social-distancing requirements, including limits on the number of customers in store at any one time, one-way aisles and floor markers spaced six feet apart in checkout lines. Retailers are taking different approaches to how they handle fitting rooms. Saks Fifth Avenue plans to hold items for 48 hours after they are tried on, Macy’s is planning to hold items for 24 hours, and Nordstrom will hold items for an unspecified period of time. Macy’s has also suspended some in-store try-on services, while other retailers—such as Target and Urban Outfitters—are keeping fitting rooms completely closed. Simon Property Group inserted a dose of optimism into the industry with its announcement on April 28 revealing plans to reopen 49 malls and outlet centers from May 1, albeit with limited operating hours to facilitate cleaning and sanitization. The malls also offer free temperature checks and packets of hand sanitizer. Simon Property Group encourages, but does not require, customers to wear face masks, but employees are required to do so while working and taking breaks. Malls are using decals, limiting seating in food courts and keeping play areas and drinking fountains closed. The company commented that initial traffic was better than expected and that it had to limit access to some properties to enforce social distancing; traffic was higher in sneaker and athleisure stores. Simon Property Group plans to reopen malls on Long Island and in the Hudson Valley in New York State on May 16, the day after the state’s “Pause” executive order expires. The announcements of gradual store reopenings are a much-needed change of direction from the negative news flow surrounding physical retail, and we are cautiously optimistic that the health and safety measures being implemented by retailers will ease the concerns of consumers and give retailers the confidence to reopen further and get back to business. To read Coresight Research’s ongoing coverage of the coronavirus outbreak, please see our Coronavirus Insights page and our Coronavirus Blog.

US RETAIL AND TECH HEADLINES

Wayfair Reports Sales Boost Due to Coronavirus (May 5) Company press release

• Online home-furnishing retailer Wayfair reported a 19.8% year-over-year increase in total revenues to $2.3 billion from $1.9 billion for the first quarter ended March 31, as customers flocked to buy online owing to the coronavirus lockdown. However, the retailer’s net loss widened to $285.9 million, with advertising expenses piling up.
• The retailer stated that it delivered 9.9 million orders in the quarter, up 21% from a year ago. The number of active customers increased 29% year over year to 21.1 million, as of March 31.

Nordstrom To Shutter 16 Locations, Restructure in Cost-Saving Move (May 5) Company press release

• Nordstrom this week announced the permanent closure of 16 stores and a restructuring of its operations in an attempt to minimize costs and combat the impact of the coronavirus outbreak. Nordstrom will also incur non-cash impairment charges associated with the store closures.
• The retailer stated that it is restructuring its regions, support roles and corporate organization, which would save $150 million in expenses. The company had previously announced plans for net cash reductions of more than $500 million in operating, capital and working capital expenses.

Lord & Taylor To Liquidate All 38 Stores (May 5) CNBC.com

• Luxury department-store chain Lord & Taylor reportedly plans to liquidate inventory in all of its 38 stores once the coronavirus restrictions are lifted. The retailer has arranged liquidators to administer the “going out of business” sales and expects to permanently shutter all 38 stores after the liquidation.
• Lord & Taylor has been considering bankruptcy proceedings, including relief in creditor terms and financial flexibility. Online apparel rental business Le Tote acquired Lord & Taylor from Hudson’s Bay Company for C$100 million ($71 million) last year.

J.Crew Files for Chapter 11 Bankruptcy Protection (May 4) Company press release

• Apparel retailer J.Crew has filed for Chapter 11 bankruptcy protection, succumbing to the economic disruption caused by the coronavirus pandemic. The company said it reached a $1.65 billion debt-for-equity swap deal with its lenders to stay afloat during the restructuring process.
• J.Crew also raised $400 million from existing lenders Anchorage Capital Group, GSO Capital Partners and Davidson Kempner Capital Management to help fund operations through bankruptcy. The retailer said operations will continue throughout the restructuring, and products will still be available for online purchase.

Victoria’s Secret Partnership with Sycamore Partners Collapses (May 4) Company press release

• Victoria’s Secret owner L Brands has terminated a previously announced transaction with private-equity firm Sycamore Partners. L Brands said that neither party would be required to pay a termination fee and that both sides have agreed to settle all pending litigation.
• Sycamore had agreed to acquire a 55% share in Victoria’s Secret for $525 million in February, allowing the brand to go private. L Brands said as part of its strategy, it still aims to establish Bath & Body Works as a pure-play public company and commits to prepare Victoria’s Secret to operate as a standalone company.

EUROPE RETAIL AND TECH HEADLINES

Ocado’s Revenues Surge as Online Grocery Delivery Demand Soars (May 6) Company press release

• British online supermarket Ocado announced that revenues of its retail unit Ocado Retail surged by 40.4% year over year in the second quarter to date, due to coronavirus stockpiling and an increase in customer demand for grocery home delivery. Last week, Ocado Group launched its first two international fulfillment centers with international partners Groupe Casino in Paris and Sobeys in Canada.
• The Ocado Group maintains a strong financial and liquidity position on the balance sheet with £1.2 billion ($1.5 billion) cash. However, the company stated that it is withdrawing its full-year sales outlook for Ocado Retail due to pandemic-related uncertainty.

EssilorLuxottica Reports Sales Plunge Due to Store Closures (May 5) Company press release

• Eyewear company EssilorLuxottica announced a 10.1% year-over-year decline in revenues to €3.8 billion ($4.1 billion) for the first quarter, ended March 31, as the coronavirus outbreak prompted store closures. EssilorLuxottica concluded the quarter with €4.9 billion ($5.3 billion) in cash and short-term investments, and a €4.8 billion ($5.2 billion) net debt.
• As announced on March 27, the company withdrew its 2020 outlook. The retailer said that revenues had further declined in April, and the board approved the launch of a €100 million ($108 million) Covid-19 fund to support employees and their families in need.

Hugo Boss Expects Further Sales Decline in Next Quarter (May 5) Company press release

• Hugo Boss posted a 17% year-over-year decline in revenues to €555 million ($602 million) for the first quarter, ended March 31, as global store closures due to the coronavirus pandemic weighed on sales. Hugo Boss said online sales jumped 39% in the first quarter and gross profit fell to €349 million ($378 million) from €424 million ($460 million) last year.
• The company expects both sales and earnings to decline in the second quarter as 75% of the group’s stores remain closed globally, and the group’s major markets of Europe and America, which usually contribute 85% to the group’s sales, have yet to fully reopen.

Waitrose Opens New Fulfillment Center (May 5) Company press release

• Supermarket chain Waitrose opened a six-acre customer fulfillment center in North London on May 7, in an attempt to double its online grocery orders in London by September. The new center, situated in Enfield, will create 370 jobs, rising to 850 once full capacity is reached.
• Waitrose is currently investing £100 million ($124 million) in its online business as it prepares for its supply deal with Ocado Retail to end in September 2020. The Enfield center will work alongside the Coulsdon center, which delivers grocery orders across the South London area.

IKEA Launches Free Virtual Backgrounds for Zoom and Microsoft Teams Calls (May 5) ChargedRetail.co.uk

• IKEA has introduced a free-to-download range of backgrounds for people to use during video calls on Zoom and Microsoft Teams apps. The new backgrounds will feature items available for purchase from IKEA stores.
• Users can select from a series of 38 different backgrounds, split between five categories including—office, celebration, with a view, romantic date and spaces. Last month, Microsoft stated that meetings on its Teams service hit a new daily record of 2.7 billion meeting minutes in one day.

  Klarna Partners with Bargain Max (May 4) ChargedRetail.co.uk

• Swedish payment technology provider Klarna has partnered with UK-based online toy store Bargain Max, as it continues to expand its extensive portfolio of retail tie-ups. Under the partnership, Klarna will offer its “buy now, pay later” payments services to Bargain Max customers.
• Customers can now opt to split their order between a number of interest-free monthly payments during the online purchase. In March, Klarna reported that it had served over 7 million customers in the UK, with a new order being placed every 1.3 seconds, over the last year.

ASIA RETAIL AND TECH HEADLINES

Panerai Introduces Watch Accessories Space in Hong Kong (May 6) RetailNews.Asia

• Italian luxury watchmaker Panerai has launched a watch accessories room in Hong Kong. The new accessories room is located in its Canton Road flagship boutique. The room offers a collection of 670 straps and bracelets, a full range of buckles and an interactive trap-display design.
• Panerai was founded in 1860 and currently sells watches through exclusive distributors and the brand’s own boutiques all over the globe.

Paytm Announces Loyalty Program for Convenience Stores (May 5) EconomicTimes.com

• Indian digital payment firm Paytm has announced a ₹1 billion ($13.2 million) loyalty program for convenience stores and small businesses across India. Under this loyalty program, Paytm will return the 1% transaction fee that it typically charges merchants on wallet transactions.
• The program will allow all merchant partners to earn unlimited reward points that can be redeemed for a voucher or for purchases from the Paytm for Business app.

CAIT Opens Seller Registration for BharatEMarket (May 5) FinancialExpress.com

• The Confederation of All India Traders (CAIT) has opened seller registration for its upcoming e-commerce marketplace BharatEMarket. Brands, retailers, distributors, wholesalers and small businesses can register to be a part of the BharatEMarket ecosystem.
• The marketplace will allow consumers to place orders from the nearest convenience store and have their orders delivered in about two hours. CAIT had initially piloted this platform in six cities across India, and it expanded the pilot to over 90 cities in two weeks.

Flipkart Group CFO Resigns, Sriram Venkataraman Appointed Flipkart Commerce CFO (May 5) Company press release 

• Emily McNeal, CFO of Walmart-owned Indian e-commerce firm Flipkart Group, has resigned from her role to pursue a career outside the Walmart Group. Effective immediately, the company has appointed Sriram Venkataraman as CFO of the Flipkart Commerce vertical, which includes the Flipkart marketplace and Myntra fashion e-commerce platform.
• Venkataraman will be responsible for financial operations including tax, risk management and treasury at Flipkart and fashion e-commerce platform Myntra. Adarsh Nahata will continue to serve as CFO of digital payment platform PhonePe.

Tencent Launches Social Commerce Mini Program on WeChat (May 4) KR-Asia.com

• Tencent launched a mini program for social commerce, called Xiao’e Pinpin, on messaging platform WeChat on April 29, 2020. The program features a range of lifestyle products, including accessories, cosmetics and electronics.
• Xiao’e Pinpin offers group-buying features, through which a user can form a group and invite contacts to make purchases. The members of the group can avail products at low prices using this feature.