One of the new truisms of pandemic-era retail is this: If a retailer was in trouble before COVID-19, that trouble will be magnified because of it. That “troubled” group of companies continues to struggle, seeking Chapter 11 or other financial lifelines. As they do, the effects of the pandemic – and the weaknesses prior to it – are taking their toll.
One of the most recent cases is GNC, which declared bankruptcy and store closings on Tuesday (June 23). And this morning (June 25), Macy’s announced more cost-cutting moves as it looks to reopen its stores. As indicated in its previous statements, the company will reduce corporate and management headcount by approximately 3,900. It will also cut staff across its stores portfolio, supply chain and customer support network, which it will adjust as sales recover.
“COVID-19 has significantly impacted our business. While the reopening of our stores is going well, we do anticipate a gradual recovery of business, and we are taking action to align our cost base with our anticipated lower sales,” said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc, in a statement. “These were hard decisions, as they impact many of our colleagues. I want to thank all of our colleagues – those who have been active and those on furlough – for helping us get through this difficult time, and I want to express my deep gratitude to the colleagues who are departing for their service and contributions. We look forward to welcoming back many of our furloughed colleagues the first week of July.”
Genette expressed confidence that the cost savings, when combined with approximately $4.5 billion in new financing, could stabilize the company. The retailer expects to save approximately $365 million in fiscal 2020 and approximately $630 million on an annualized basis. “These savings will be additive to the anticipated $1.5 billion in annual expense savings announced in February, which the company expects to fully realize by year-end 2022,” the company stated.
Macy’s was struggling with excess corporate staff at many of its mall locations before the pandemic. GNC has also struggled pre-pandemic with underperforming stores and a staggering debt load. In fact, Yahoo! Finance has characterized the company as “knocking on death’s door” for some time now. The site’s analysts have been among the most gloomy when it comes to retail recovery for the troubled group, which includes the two most high-profile Chapter 11 filings, J. Crew and Neiman Marcus.
“To be sure, 2020 is shaping up to be one of the deadliest ever for the former icons of the mall and various shopping centers,” says Yahoo! Finance. “The pandemic has kept stores closed for months and sent sales for the sector into a tailspin. With consumers only slowly venturing back out to stores after months of being quarantined, retailers are being faced with the reality [that] they need fewer stores open ... or should no longer be in business at all.”
GNC, in its bankruptcy letter to shareholders, said the company expects to improve its balance sheet and capital structure and emerge as a long-term sustainable company.
“Over the past year, GNC has been executing a store portfolio optimization strategy to close underperforming stores, while continuing to invest in omnichannel and brand strategies to better meet consumer demand,” stated the letter. “This process will enable GNC to accelerate these strategies, including its store portfolio optimization. GNC expects to accelerate the closure of at least 800 to 1,200 stores. This acceleration will allow GNC to invest in the appropriate areas to evolve for the future, better positioning the company to meet current and future consumer demand around the world.”