AEO, Caleres and Lululemon implement cost-cutting initiatives to stay afloat during Covid-19 pandemi
As it becomes increasingly clear that store closures and other disruptions related to the ongoing Covid-19 crisis will continue for longer than anticipated, companies including AEO,Caleres, Lululemon andUltaBeauty have announced further measures to preserve their financial liquidity, including furloughs, salary cuts and expense reductions.
American Eagle Outfitters (AEO) will be furloughing store, field and corporate associates from April 5 and has also announced that it will be delaying merit increases for employees and implementing a hiring freeze.
The company has, however, committed to supporting employees affected by the Covid-19 pandemic, promising to maintain benefits and fund 100% of the health premiums for eligible employees through at least April 2020.
The retail group has also established a program for employees experiencing economic distress due to a Covid-19 diagnosis through its AEO Foundation and has set up an online associate resource center providing contacts, as well as information on benefits and state unemployment resources.
Other cost reduction measures introduced by AEO as it deals with continued disruption include the suspension of its share repurchase program, the deferral of the payment of its first-quarter cash dividend, cuts to inventory, and decreases in capital expenditures on stores, IT and a range of other projects.
Boardriders The Huntington Beach, California-based owner of brands including Quiksilver, Billabong and Roxy has implemented temporary furloughs in certain functions and regions and will also be reducing pay across its global workforce. Furthermore, the company has undertaken a coordinated strategy and operations review and is taking steps to adapt to the current retail landscape, a process which, according to the group, “will unfortunately result in some role eliminations.” Caleres The footwear and accessories group has announced furloughs and lay-offs across its retail stores, distribution centers and corporate facilities, and has also implemented “a meaningful salary reduction” across all levels of its remaining workforce, including its executive leadership team and board of directors. On top of this, the owner of Sam Edelman, Famous Footwear and Naturalizer has moved to cut costs by reducing inventory and receipts, extending credit terms, deferring or canceling capital projects, postponing marketing operations and re-evaluating the rhythm of its promotional activities. Caleres has also joined a number of its industry peers and begun manufacturing surgical masks at its Allen Edmonds factory in Port Washington, Wisconsin, in order to support efforts to deal with supply shortages for healthcare workers. Express Based in Columbus, Ohio, fashion retailer Express has announced that it will be furloughing most of its store employees, as well as “a number of corporate associates.” Merit pay increases for fiscal 2020 have already been suspended at the company. Express has also frozen hiring for the duration of the health crisis and is implementing a range of other unspecified measures to reduce expenses, capital expenditures and inventory receipts. Lululemon Despite the ongoing closure of its stores in North America, Europe, Malaysia, Australia, and New Zealand, Canada’s Lululemon has committed to continuing pay protection for its employees through June 1. The company’s senior management team, however, has agreed to a 20% reduction in their salaries over the next three months, and board members have forgone their cash retainer. The resulting savings will be put towards the We Stand Together Fund recently set up by Lululemon to support employees facing hardship related to Covid-19. The Vancouver-based athleticwear brand is also taking steps to re-evaluate its expense structure, capital investments, and store opening and remodel projects, and is temporarily suspending its share repurchase program. Ross Stores The parent company of Ross Dress for Less is temporarily furloughing the majority of employees working in its stores and distribution centers, along with a selection of other associates across its business. Ross Stores CEO Barbara Rentler and chairman of the board Michael Balmuth announced that they will be receiving no salary, with the company’s senior executive team having also agreed to receive “substantial salary cuts,” while outside board members have forgone their cash retainer. Ulta Beauty The Bolingbrook, Illinois-based cosmetics retailer announced on Thursday that it will be suspending new hires and deferring merit increases for all corporate and store associates. The company is also working to align its inventory receipts with current sales trends and is prioritizing expense payment obligations so that it can concentrate on carrying out essential services. The pace of Ulta’s international expansion plans will be decelerated as it scales back its investments in these projects, although the company still expects to have an omnichannel in presence in 2021. Reductions in capital expenditure plans also mean that the retailer no longer expects to open 75 new stores in fiscal 2020 and is currently working on an adjusted schedule for store openings, relocations and remodels. Ulta has also suspended its stock repurchase program. Zumiez The Lynnwood, Washington-based retailer, which aside from its namesake Zumiez stores, also operates under the Blue Tomato and Fast Times banners, is suspending new hires and will be laying off almost all of its part-time staff. Planned bonuses for fiscal 2020 will be eliminated and the majority of merit raises delayed. As well as pausing its share repurchase program and extending the payment terms for vendor invoices, the company will also be looking to cut costs by delaying or canceling select projects, reducing spending on non-essential items such as travel and marketing, and canceling or delaying orders so as to decrease planned inventory receipts. Zumiez is currently in the process of negotiating relief with its landlords and has suspended its rent payments for an unspecified period of time.
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