The forces closing in on retail have forced its various trade and advocacy groups to press their case in Washington. Among those forces: 2.1 million in the industry out of work as of April, spring inventory still sitting in stores and various government programs that might have to be stepped up to help the industry deal with its reopening and revenue issues.
According to The Washington Post, even routine finance issues have become risky. The situation has led the American Apparel and Footwear Association (AAFA) to draft a letter warning Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell that the industry could suffer “a commercial credit crisis that threatens to seize up our economy and stall the safe restart in its infancy.”
Part of the issue, according to the letter, is found in the supply chain. As they need more credit to alleviate top line revenue reductions, financial institutions are pulling back from them. “Unless this is fixed soon, the retail engine that supports one in four American jobs will have a hard time coming back to life,” a draft of the letter says.
While the AAFA is taking its concerns to the government, the National Retail Federation (NRF) has expressed cautious optimism. Its chief economist praised the reopening of retail at least conditionally in all 50 states, it is too soon to predict the recovery Jack Kleinhenz said.
“Is it possible the worst of the coronavirus pandemic is behind us? Maybe, but we are not out of the woods yet, and uncertainty abounds,” Kleinhenz said. “Predicting what will happen is even more challenging than usual. While history often helps guide us, previous downturns offer little guidance on what is likely to unfold over the next six to 12 months. There is no user’s manual in which government, businesses or consumers can find precise solutions for what we are going through.”
Kleinhenz found cautious optimism in weekly studies being produced by the U.S. Census Bureau — the Household Pulse Survey, the Small Business Pulse Survey and the Business Formation Statistics report. The first two show households have seen reductions in income and most businesses do not expect to resume full operations for six months. The Business Formation report, however, found new businesses are still being formed despite the pandemic, with 9,000 applications for companies planning to hire workers filed in a single week in mid-May alone.
Over the weekend the NRF supported legislation that would give employers more flexibility to use Paycheck Protection Program money, which was aimed at helping small and medium-sized businesses (SMBs) survive the pandemic.
“Businesses need more flexibility as they struggle with how to respond to COVID-19,” NRF Senior Vice President for Government Relations David French said. “Retailers want to reopen their stores, but first they want to make sure their stores are safe for their employees and customers. Congress needs to give them the time to do that properly and let them invest government aid in the supplies, equipment and modifications needed to ensure safety.”
Meanwhile potential development money from other sources continued to become available. Mall and real estate developer Brookfield Asset Management announced the launch of a Retail Revitalization Program to assist with the recapitalization of retail businesses “with operations in the major markets in which Brookfield operates globally.” Brookfield is targeting $5 billion to be put toward the fund.
The program will be led by Ron Bloom, managing partner and vice chairman of Brookfield’s Private Equity Group, who was one of the forces behind the automobile industry bailout during the 2008 financial crisis. “This initiative is being designed to assist medium sized enterprises in getting back on their feet. We believe this is a critical component to getting the economy moving again, and we would like to partner with companies and entrepreneurs that can draw on our capital and expertise to stabilize and grow their business,” said Bloom.