Macy’s to furlough majority of its 125,000 workers
NEW YORK – Macy’s said it will temporarily stop paying tens of thousands of employees who were thrown out of work when the chain closed its stores in response to collapsing sales during the pandemic.
The majority of its 125,000 employees, including stock people and sales clerks, will still collect health benefits, but the company said it will transition to an “absolute minimum workforce” needed to maintain basic operations. Macy’s has lost the bulk of its sales due to the temporarily closing of all 500 of its stores starting March 18.
The move is perhaps the most dramatic sign that even big name retailers are seeing their business evaporate and that the $2.2 trillion rescue package crafted last week may have come too late for some.
Nordstrom said last week it was furloughing a portion of its corporate staff. Shoe company Designer Brands Inc., which operates DSW Designer Shoe Warehouse, furloughed 80% of its workers.
Analysts expect more furloughs to come as retailers scramble to pay their employees from fast-dwindling cash reserves. Labor is the single biggest monthly fixed cost for retailers, according to investment research firm Cowen & Co.
The furlough of workers will have negative consequences for an economy in which the retail industry supports one out of four workers.
“This could push us further into a damaging recession that will last longer than the duration of the crisis,” said Neil Saunders, managing director of Globaldata Retail.
More than 190,000 stores, including J.C. Penney and Neiman Marcus, have temporarily closed, accounting for nearly 50% of the U.S. retail square footage, according to Saunders.
Discounters, grocers and wholesale clubs that sell essential items like groceries remain open, although they have their own challenges of keeping up with shoppers who continue to stockpile canned goods, paper towels and other staples.
According to a recent report by Cowen & Co., department stores generally have enough cash to make it to about five to eight months with their stores temporarily closed. Macy’s, however, has enough for five months, Cowen said.
The big question is how much of these furloughs will lead to permanent layoffs.