Synchrony looks to reduce real estate, headcount
STAMFORD — Consumer financial- services firm Synchrony plans to exit a number of its leased properties and could also reduce its workforce to cut costs in response to the coronavirus crisis.
Those changes comprise part of a strategic review that the Stamford- based firm launched in July, the company noted in a filing this week to the U. S. Securities and
Exchange Commission. Those measures would lead to restructuring charges between $ 90 million and $ 110 million in the third quarter of this year for the No. 170 company on this year’s Fortune 500 list. But they could lead to savings next year between $ 150 million and $ 250 million.
“Synchrony continues to manage the company for the long term, taking actions to become stronger and more competitive as we manage through the economic cycle caused by the pandemic,” the company said in a statement this week. “As part of Synchrony’s ongoing transformation, we continue to drive efficiency and cost savings across our business.”
Synchrony did not specify in the filing which offices it planned to leave. It is still committed, however, for the long term to its Stamford headquarters after it renewed its lease last year for 313,000 square feet at 777 Long Ridge Road.
A map on its website shows about 20 other company locations in the U. S., including Chicago; Charlotte, N. C.; Marlborough, Mass.; Bridgewater, N. J.; Orlando, Fla.; Phoenix; Salt Lake City; San Francisco and San Jose; and other sites in California, Arkansas, Ohio, Georgia, Kansas, Minnesota, Puerto Rico, South Dakota and Washington.
The decreased office footprint reflects major shifts in Synchrony’s workplace arrangements that have been instituted in response to COVID- 19. Its approximately 17,000 employees are working remotely, and they will continue to do so until at least early January.
In the filing, Synchrony said that its reduction in operating expenses would involve “certain employeerelated actions both on a voluntary and involuntary basis.” It has implemented hiring and promotion freezes and is offering buyouts to some employees, according to a company spokeswoman.
The firm has not made layoffs yet, but it has not ruled out doing so in the future, the spokeswoman said.
During a Barclays- hosted conference Monday, CEO Margaret Keane and Chief Financial Officer Brian Wenzel outlined the company’s rationale for the changes.
“Really important to rightsize the cost, but at the same time, we want to make sure we're investing for the future,” Keane said. “And so having that correct balance because I think it's really easy to just start cutting and burning and burning. That's not really our approach. We're being very surgical about — because we want to really come out of this to be even more technologically savvy and focused on our merchants and our partners and our consumers.”
Synchrony ranked as the 12thlargest employer in Stamford, with about 660 employees, according to a report released earlier this year by the city’s Office of Economic Development.
As the largest provider of store credit cards in the U. S., Synchrony has acutely felt the pandemic – which has sparked store closings and constrained consumer spending.
Second- quarter revenues dropped 18 percent year over year, to $ 3.4 billion, a decline primarily due to the impact of COVID- 19 and last year’s sale of the company’s Walmart credit portfolio.
Profits plummeted 94 percent to $ 48 million, with the bottom line taking into account a 40 percent increase in the provision for credit losses. The reserve growth reflected the company’s anticipated coronavirus- related losses and a Walmartlinked reserve reduction last year.
In response to the COVID- 19 crisis, Synchrony announced earlier this year that it would be offering a number of forbearance options, including waiving late fees and interest charges and deferring certain accounts’ minimum payments for up to three months.
Net charge- offs — which refer to debts the company does not expect to recoup — comprised 5.35 percent of loan receivables in the second quarter, compared with 6.01 percent in the same period last year. The decrease was driven by the sale of the Walmart portfolio.
While the pandemic has disrupted in- person transactions, Synchrony officials said they were encouraged by increased online activity. More than 60 percent of total payments on cardholders’ accounts are done digitally, they reported in July.
“We believe we have an advantageous position as the shift to digital has accelerated,” Keane said in an earnings call with investment analysts in July. “We will continue to prioritize investments to augment our digital assets and capabilities to meet the rapidly evolving needs of our cardholders and partners.”