Macy’s, Kohl’s, The Gap and Ascena Among First to Furlough Employees Due to Coronavirus: They Will Not Be the Last

• While Macy’s did not announce the exact number of employees furloughed, the company reported that it had lost “the majority of its business” due to store closures across its banners. Macy’s had 776 stores in its portfolio at the end of the 4Q19: 551 Macy’s, 53 Bloomingdale’s and 172 Bluemercury store locations. The company reported it was moving to the absolute minimum workforce needed to maintain basic operations. Management expects fewer furloughs in Macy’s digital business, as digital will support distribution and call centers to serve customers through online channels. 
• Kohl’s announced it will temporarily furlough store and store distribution center associates, as well as some corporate office associates whose work has been significantly reduced by the store closures. 
• Ascena implemented a furlough program across its business, including all store associates and close to half of its corporate associates. 
• The Gap will furlough most store teams in the US and Canada, pausing pay but continuing to offer applicable benefits until stores are able to reopen, reducing its headcount across its corporate functions around the world. In addition, the entire Gap Inc. leadership team and the board of directors will take a temporary pay cut. 

Coresight Research Insight: In our Coronavirus Retail Robustness Index, we evaluate the retailers best able to weather the coronavirus pandemic. Based on this information, we predict today’s announcements are only the beginning of many more to some in retail. We further predict a new estimate of permanent store closures of 15,000 in the year 2020, up from our previous estimate of 8,000. Even market leaders are struggling as foot traffic disappears, and many are exercising all options including drawing lines of credit, cancelling orders, cutting spending—and even taking corporate pay cuts. For some mega-retailers such as Macy’s, the magnitude of the physical footprint and cost of the physical space (not to mention the lost revenue) means furloughs and store closures are inevitable. The only question is: How many store closures and employee furloughs will become permanent if the situation continues?