For most retailers, this virus thing is starting to hurt. In fact, the current situation now has a nickname, courtesy of analysts at Jefferies: Closeageddon.
“Retailers are now in full-on battle mode,” said Jefferies Analyst Randal Konik, who foresees a 90 percent to 100 percent drop in mall traffic. “For retailers, this is now about near-term survival.”
The pain started to become very evident on Wednesday (March 18), as the trade group that represents mall owners asked for a government bailout and big retail names started to put a price tag on the revenue losses they expected to incur.
The government request came from the International Council of Shopping Centers (ICSC), which counts Simon Property Group and Kimco among its members. Some malls have already shut down, including Paramus Park and Westfield Garden State Plaza in New Jersey, Related Co.’s Hudson Yards in New York City, Triple Five Group’s Mall of America in Minnesota and the King of Prussia in Pennsylvania. Simon closed all of its 209 malls effective Wednesday night.
“These closures are placing an insurmountable strain on our members, and we believe federal government action is urgently needed,” ICSC CEO Tom McGee said in the letter. “In the most immediate term, we believe the federal government should guarantee or directly pay for business interruption coverage for retailers, restaurants and other tenants as well as landlords. While some companies may have third-party insurance, the current crisis is not covered by those policies.”
The shopping center industry in the U.S. generates nearly $400 billion of state and local taxes, McGee said. Also at stake: “the repayment of up to $1 trillion of secured and unsecured debt underlying the shopping center industry.”
Other scary numbers are being thrown around. Adidas says closings in China would cost it about $1 billion in lost sales. “Add closures across the U.S. and Europe, and multiply that by the number of household names retreating, and the bill to the retail industry may be astronomical,” says Bloomberg.
How to cope? While restaurant owner Danny Meyer laid off 2,000 employees on Wednesday across his 22 high-end brands, other retailers are stepping up with shorter hours rather than closures, and are offering relief for employees.
"Our customers rely on us for urgent repairs, products and materials, and we've always been committed to serving them during times of crisis and natural disaster," Craig Menear, Home Depot’s chairman, CEO and president, said in a press release. "I want to thank our associates and suppliers for their dedication and hard work to ensure we're there for our communities during this challenging time."
The chain announced on Wednesday that it’s adjusting its store hours to close daily at 6 p.m., while opening hours will remain unchanged. Home Depot says the adjusted hours will enable them to restock shelves and clean. It will also expand its paid time off policy: All hourly full-time employees will receive an additional 80 hours of paid sick time, while part-time employees will receive an additional 40 hours of paid sick or personal time. Employees that are diagnosed with COVID-19 or advised to self-quarantine will continue to be paid during that time.
7-Eleven, which had been promoting its delivery service pre-crisis, has added a contactless delivery option where customers can opt for the driver to leave their delivery at the door. It has also tightened standards and procedures for hygiene, handwashing, sanitation, food handling and preparation in stores, and increased the frequency of cleaning high-touch surfaces.
T-Mobile is in the process of implementing an approach where hourly retail employees will maintain their income despite the closing of 5,300 stores. T-Mobile President and COO Mike Sievert said in an email to employees, “These aren’t simple decisions, but they are the right ones. We’ve said it before – the service we provide to keep our customers connected is essential, particularly right now. This is not a time to focus on tackling the competition. This is our time to focus on our community and do our part to stop COVID-19 from spreading.”