New Stimulus Package Doesn’t Look Promising For Retail

vacant mall parking lot

Non-essential retail needs help from the federal government and it doesn’t look like its coming. That’s the prevailing sentiment as all signs point to the preparation of a new stimulus bill in Congress.

Several outlets reported on Tuesday morning (March 31) that House Democratic leaders discussed ideas for yet another package to add on to the massive $2 trillion bill passed on Friday (March 27) in response to the coronavirus crisis. According to Bloomberg, committee chairmen and their staff are considering more than half-dozen proposals — none of which look like they will help non-essential retailing, which was the heading under which hundreds of thousands of workers have been furloughed and entire companies are at risk.

House speaker Nancy Pelosi has signaled that her “phase 4” package will focus on healthcare workers, water systems, broadband and the energy grid. “It is clear that we need to do more, and that is particularly true when it comes to protecting the health and safety of frontline health workers,” House Education and Labor Committee Chairman Bobby Scott (D-Va.) told reporters on Monday.

The White House officials have compiled their own lists of requests totaling roughly $600 billion. The proposals include more state aid as well as financial assistance for mortgage markets and the travel industries. There were no retail mentions in the coverage of the White House considerations.

All this happens in an environment where non-essential retail is eligible for some of the aid packages passed in the first stimulus package, most being in the form of loan eligibility. Many of those retailers — Nike among them — got hit hard in trading Monday.

“I can certainly understand what they’re trying to do. These names were names that were previously strong before we got into this coronavirus crisis. Simpler Trading’s options director, Danielle Shay. “However, these are all consumer discretionary names and nobody is going to be going out buying [a] $1,000 Goose jacket when they can’t even afford their mortgage or their rent,” Shay told CNBC’s “Trading Nation.”

The idea of a new stimulus received a powerful advocate Monday in L.L.Bean CEO Stephen Smith. “I think it’s a really serious situation, and I actually don’t think it’s getting enough attention,” Smith told CNBC on Monday.

Smith said essential retailers were holding up amid the coronavirus pandemic, while retailers with less than 500 employees are eligible for the small business loans in the $2 trillion stimulus package signed Friday by President Donald Trump.

But there is a “huge segment in the middle” that is so far “being missed,” Smith said. “All of those apparel retailers, every label of a piece of clothing that someone is wearing right now, all of them are struggling mightily with full rent, full payroll and, if they’re store-based, close to zero sales. That’s a group that needs attention in the next stimulus package for sure.”

The stimulus discussion comes as some retail chains struggle. GameStop, which tried to declare itself an “essential” business before closing its stores, is now struggling for survival. In its annual report last Thursday, the company reported $6.5 billion in annual revenues in 2019, down 24 percent from 2018. While it cut net losses 35 percent last year, the company still remained $470 million in the red.

“GameStop already had it tough going into this year, confronted by new seismic shifts to mobile and cloud-based subscription gaming,” said Peter Csathy chairman and founder of CREATV Media, a consulting firm that advises gaming and media companies. “And now this pandemic, which instantaneously shutters much of the retail world … Those are 1-2 gut punches that have the potential to knock them out.”