Canceled orders and furloughed employees are part of today’s retail reality
In a letter to vendors last Thursday, Ross Stores canceled all purchase orders through June 18, joining numerous other “non-essential” retailers that are taking drastic steps to preserve cash as a shield against the impact of the coronavirus.
The off-price retailer also extended payment terms on existing merchandise by 90 days. The move comes as non-essential stores began temporarily closing locations in mid-March.
WWD reported last week that moves by stores to cancel orders and postpone payments to vendors has increased as the operational and financial realities of the outbreak have become clear.
“We’ve taken actions to give Macy’s Inc. financial flexibility to sustain the business through the prolonged closure,” Jeff Gennette, Macy’s CEO, told WWD. “Some of those actions — cancelling orders, extending payment terms — directly impact our partners. We don’t make these decisions lightly.”
For non-cancelled orders, Macy’s extended its payment terms to 120 days from 60.
A Wall Street Journal report last week said H&M, Marks & Spencer and Primark were among European retailers suspending or canceling orders. A H&M spokesperson told the Journal, “Our long-term commitment to suppliers will remain intact, but in this extreme situation we need to respond fast.”
Many retailers are quickly rolling out cost-containment efforts, including reducing salaries and implementing furloughs. The top executives at Dick’s Sporting Goods, Kohl’s, Macy’s, Nordstrom and L Brands have all agreed to forgo their salaries and reduce the pay of their management teams.
Yesterday, both Macy’s and Kohl’s announced they were furloughing the majority of their employees. In Macy’s case, that means around 125,000 people will not be working; for Kohl’s, the number is about 85,000.
Macy’s said fewer furloughs would take place in its digital business, distribution centers and call centers. “We expect to bring colleagues back on a staggered basis as business resumes,” the department store retailer said in a statement.
Nordstrom has also announced that it is furloughing a portion of corporate employees for six weeks.
“This incredibly tough decision enables us to continue providing much-needed benefits, including health care, to our people,” CEO Erik Nordstrom and chief brand officer Peter Nordstrom wrote in a letter to employees. “It means that when life goes back to normal, as we know it eventually will, we can keep providing consistent employment and pay to tens of thousands of people.”
- Ross Stores tells vendors it will cancel merchandise orders through mid-June – CNBC
- Retailers Rile Vendors With Order Cancellations – Women’s Wear Daily
- Retailers Cancel Orders From Asian Factories, Threatening Millions of Jobs – The Wall Street Journal
- Nordstrom Provides Business Update Related to Coronavirus – Nordstrom
- Macy’s, Inc. Provides Additional Business Update in Response to COVID-19 Outbreak – Macy’s
- A Message from Our CEO Roger Rawlins: COVID-19 Operations Update for March 25, 2020 – Designer Brands
- Macy’s, Inc. Provides Business Update in Response to COVID-19 Outbreak – Macy’s
- Kohl’s Extends Temporary Store Closures Nationwide and Provides Business Update in Response to COVID-19 Pandemic – Kohl’s
DISCUSSION QUESTIONS: Should the needs of employees take precedence over vendor partners as retailers seek to preserve liquidity in response to the coronavirus pandemic? What overall advice would you have about making and communicating such extreme cost-cutting decisions?