FROM THE DESK OF DEBORAH WEINSWIG

US Retailers Gathering and Preserving Cash To Fight Another Day The retail shutdown continues in the midst of the ongoing coronavirus pandemic; for example, New York State has recently ordered schools and nonessential businesses to remain closed for another two weeks, currently through April 29. Following a large number of store closures, retailers have undertaken several financial measures to retain and increase their cash supplies in order to weather the downturn, including the following: Furloughing employees. Employee compensation represents an enormous expense for retailers, particularly for those unable to generate offsetting revenues at the current time. Several large retailers have announced employee furloughs, including Ascena, Gap Inc., Kohl’s and Macy’s, which cumulatively employed more than 400,000 workers. Cutting general expenses. In addition to reducing payroll expenses, retailers such as American Eagle, Carter’s, Nordstrom and RH have cut other costs, including discretionary expenses, raises and new hires, as well as implementing salary reductions. RH is targeting $150 million of expense reductions in 2020. Drawing on credit facilities. Drawing on revolving credit facilities brings cash into company coffers, and it may prove to be a wise short-term move as access to credit could become more difficult in the future. Macy’s is accessing its $1.5 billion credit facility, Nordstrom drew down $800 million on its revolver and Tapestry drew $700 million on its $900 million facility. Cutting dividends and suspending share repurchases. Dividends and share repurchases are ways in which companies return cash to shareholders; they can be suspended quickly to preserve cash. Macy’s, Nordstrom and Tapestry have announced dividend cuts, and Kohl’s has confirmed that it is evaluating its dividend program. Best Buy has suspended share repurchases. Cutting or postponing capital spending. US retail capital spending (on stores and technology) runs around $90 billion annually, and programs can be canceled or postponed in short order. Retailers announcing capex cuts include Macy’s, Nordstrom, RH, Ulta Beauty and The TJX Companies. We estimate that more than $100 billion in retail capital spending was lost in the years surrounding the global financial crisis, and capital spending took several years to return to pre-crisis levels. Withholding rent. While not paying rent violates leases, this tactic could preserve precious cash, enabling retailers to fight over rent at a later date. Pier 1 Imports asked the court to allow it to stop paying rent during its bankruptcy process, and Mattress Firm has told its landlords that it will pay partial rent at its store locations. However, lack of rent payment could threaten landlords’ ability to meet their own obligations to their investors and creditors. Canceling orders. Since much inventory is currently stranded in closed physical stores and warehouses, retailers have little room to accept new merchandise. Many large retailers—including Macy’s, Nordstrom, Ross Stores and The TJX Companies—have notified vendors of order cancelations, which has caused factories to cease production or be stuck with finished goods and materials. Shareholder-rights plans. Chico’s FAS announced its adoption of a limited-duration (one-year) shareholder-rights plan (commonly called a “poison pill”), whereby shareholders would receive one right per share as of April 13. If certain types of investor acquire certain percentages of the company’s shares, the rights owners will be able to purchase additional rights at a discount, thus diluting the potential acquirer’s holdings and making it very expensive to take the company over. While many of the above measures appear extreme, they also seem to be useful tactics in an ongoing retail shutdown, and cash will be essential and likely hard to come by during an industry recovery. For additional information, please read our Coronavirus Insights, visit our Coronavirus Blog and see our Coronavirus Retail Robustness Index.

US RETAIL AND TECH HEADLINES

Macy’s CFO Paula Price Resigns (April 7) Company press release

• Macy’s has announced that its EVP and CFO Paula Price will leave the company, effective May 31, 2020. She has served in her current role at the department-store retailer since July 2018.
• The company said that an external search is underway for Price’s replacement. Price will continue as an adviser to Macy’s through November 2020.

Pinterest Adds a New “Shopping” Tab to Search Results (April 7) WWD.com

• Social media app Pinterest has broadened its shopping capabilities across the platform with updates to existing features and a new shopping tab. The “Shop” tab is an improved visual search that displays products in stock and shows up on searches and boards, and it offers the ability to filter by price and brand.
• The new tab incorporates Pinterest’s existing Product Pin technology, which directly connects a Pin to the e-commerce website’s checkout page, to promote purchases.

TJX Announces Furloughs and Executive Pay Cuts (April 7) WWD.com

• Off-price retailer The TJX Companies has joined the group of businesses furloughing workers and taking executive pay cuts in the midst of the coronavirus. The company stated that a majority of hourly in-store and distribution-center associates in North America will be temporarily furloughed, effective April 12.
• Additionally, CEO and President Ernie Herrman and Executive Chairman Carol Meyrowitz will take a 30% pay cut from April 12 to July 4, while other executives can expect a 20% reduction in salary.

CVS Starts Drive-Thru Rapid Testing in Georgia and Rhode Island (April 6) CNBC.com

• CVS Health has launched two new drive-thru coronavirus testing sites at Georgia Tech in Atlanta and Providence, Rhode Island. The retailer aims to perform up to 1,000 tests per day using Abbott Laboratories’ rapid COVID-19 test.
• CVS opened its first drive-thru testing service in one of its Massachusetts stores on March 20. The tests will be available to patients who meet Centers for Disease Control and Prevention and state government guidelines.

PVH Completes Sale of Speedo North America for $170 Million (April 6) Company press release

• Apparel company PVH Corp. has completed the sale of its North American swimwear business Speedo to Pentland Group, the parent company of Speedo International, for $170 million in cash. Pentland Group will now run the Speedo business globally.
• The transaction was first announced in January and its proceeds will contribute to the liquidity position of PVH, which now stands at more than $1.3 billion in cash and available borrowings.

EUROPE RETAIL AND TECH HEADLINES

ASOS Raises £247 Million in Share Placing as Covid-19 Crisis Impacts Sales (April 8) Company press release

• Online fashion retailer ASOS has successfully raised £247million ($304 million) through a share placement, to combat the impact of the coronavirus pandemic. ASOS first announced plans to raise extra capital on Tuesday afternoon as revenues dropped by around 20–25% in the most recent three weeks of trading after the lockdown came into effect.
• The retailer reported stronger sales ahead of the coronavirus outbreak, as sales rose 21% to £1.5 billion ($1.9 billion) and pre-tax income jumped 653% to £30.1 million ($37.2 million) during the six months ended February 29, 2020. The new shares issued represent approximately 18.8% of the business prior to issue.

Tesco Revenues Increase by About One-Third in the Midst of Panic Purchases (April 8) Company press release

• British grocery retailer Tesco recorded a sales boost of around 30% in recent weeks as people started stockpiling and panic buying during the early days of the coronavirus outbreak. However, the retailer has warned that the impact of coronavirus could cost the retailer cost up to £925 million ($1.1 billion) from higher recruitment and distribution costs.
• For the fiscal year ended February 29, Tesco’s sales decreased by 0.7% year over year to £56.5 billion ($69.8 billion) and company generated a pre-tax profit of £1.3 billion ($1.6 billion) on sales of £64.8 billion ($80 billion). The retailer agreed to pay a final dividend of 6.15p per share, totaling £635 million ($785 million).

Carrefour Italia Launches Free Delivery of Pre-Packaged Kits with Essential Goods (April 7) ESMMagazine.com

• Carrefour Italia has introduced “Gli Essenziali,” a free home delivery service that provides pre-packaged kits of essential food and nonfood products. The service allows consumers to purchase the kits online via a designated website and will be available across Italy for delivery within four days.
• The website offers food boxes categorized as “Vegetarian,” “Sea” and “Land,” each priced at €69 ($75), containing enough supplies for two people for one week. Three more categories labelled “Baby,” “Child” and “Care Home and Person” are kits dedicated to children and personal and household hygiene products, which are priced between €59 and €79 ($64–86).

Costcutter Opens 20 Pop-Up Stores in NHS Hospitals (April 7) RetailGazatte.co.uk

• UK-based convenience-store chain Costcutter has launched 20 pop-up stores in NHS hospitals across the country. The retailer intends to help key staff who are unable to leave the hospital amid the coronavirus crisis to buy essential goods.
• Costcutter worked in collaboration with food-service company Compass to open the temporary stores. The retailer said that the pop-up shops will fill units left by the temporary closure of some non-essential retail spaces across the hospital sites.

Eve Sleep’s CEO James Sturrock Steps Down; Promotes CMO Cheryl Calverley to CEO (April 6) RetailGazette.co.uk

• UK-based online mattress retailer Eve Sleep has announced that James Sturrock will step down from his role as CEO to take up a new external position, effective May 12. However, Sturrock will continue as a non-executive director of the board.
• Eve Sleep also announced that its Chief Marketing Officer (CMO) Cheryl Calverley has been promoted to CEO. Calverley joined the retailer as CMO in December 2018 with over 15 years of experience in marketing and building brands.

McColl’s Collaborates with Deliveroo To Provide Online Deliveries (April 6) RetailGazette.co.uk

• British food retailer McColl’s has partnered with online food-delivery service Deliveroo to offer online home delivery for the first time. Customers can order daily essentials such as groceries, toiletries and household goods via the Deliveroo app.
• The service will initially be rolled out at 120 McColl’s stores and will expand to 300 stores in the coming weeks. The retailer aims to ensure that all orders will be “contact free” and delivered in less than 30 minutes.

Clarks To Permanently Close Some Stores (April 7) RetailSector.co.uk

• Footwear brand Clarks has announced that it will permanently close about 10 of its stores in the UK, due to the impact of the coronavirus crisis. Clarks has appointed financial services company Rothschild & Co. to explore financing options, according to Sky News.
• Clarks currently operates 347 stores in the UK, all of which are temporarily closed due to the coronavirus crisis. The retailer has also furloughed thousands of its store employees and is currently reviewing alternatives for the rest of its workforce.

ASIA RETAIL AND TECH HEADLINES

Alibaba To Launch Relief Initiative for Small and Medium Enterprises (April 7) Alizila.com

• Alibaba plans to launch “The 2020 Spring Thunder” initiative, a relief initiative for small and medium enterprises (SMEs). The initiative will utilize Alibaba’s expertise to create new supply chains, stimulate demand, promote trade and help alleviate financing challenges caused by the coronavirus pandemic.
• The initiative will help export-focused SMEs to expand into new markets through Alibaba’s subsidiaries such as AliExpress, Lazada and Tmall World. The initiative will also help SMEs in the agricultural sector with digitization and create 1,000 Alibaba digitized agricultural centers across China.

Amazon India Invests $37.6 Million into Its Food Retail Unit (April 7) Retail.EconomicTimes.com

• Amazon India has invested ₹2.84 billion ($37.6 million) into Amazon Retail, its grocery and food products unit. This comes at a time when Amazon can only sell essentials on its Indian marketplace due to lockdown restrictions amid high demand for grocery and food items.
• Amazon Retail plays a critical role in fulfilling orders for Amazon Pantry and Amazon Fresh, the two main avenues through which Amazon sells food items. Amazon has recently restarted its food delivery in selected areas of about 40 cities.

FamilyMart Plans To Open Over 200 Stores in Taiwan (April 7) InsideRetail.asia

• Japanese convenience-store chain FamilyMart plans to open 220–230 new stores in Taiwan in 2020. The firm has suffered minimal fallout from the coronavirus pandemic, as only a low percentage of its earnings are from operations in Mainland China, and it expects operations in China to normalize in July.
• The company is the second-largest convenience store chain in Taiwan with 3,606 stores and had reported NT$1.83 billion ($60.56 million) in revenues in Taiwan last fiscal year.

Pomelo Launches Initiative To Aid the Fight Against Coronavirus (April 6) InsideRetail.asia

• Asian fashion brand Pomelo has launched Pomelo Cares, an initiative to support frontline medical sector workers during the coronavirus pandemic. Pomelo Cares will support organizations and charities leading coronavirus relief efforts in Indonesia, Singapore and Thailand.
• The program will donate all of the profits from the sale of its three-pack antibacterial fabric masks to partner health organizations. The company will also donate over 40,000 surgical masks to Thailand’s Red Cross.

Flipkart Partners with Uber To Deliver Essential Items in India (April 6) Retail.EconomicTimes.com

• Walmart-owned e-commerce retailer Flipkart and ridesharing company Uber have partnered to deliver essential items in select Indian cities. Uber India is also looking into partnerships with other e-retailers in the country to offer similar services.
• The service is currently available in the cities of Bengaluru, Delhi and Mumbai, and the companies are looking to expand it to other cities across India. Uber India has held training sessions for its driver partners in health and safety standards and provided them with masks, gloves and sanitizers to help maintain hygiene.