Nordstrom to pay half rent for the rest of 2020
As retailers continue to struggle with the impact of the Covid-19 pandemic, department store operator Nordstrom has reportedly informed the landlords of both its full-price namesake locations and its off-price Nordstrom Rack stores that it will only pay half of its occupancy costs for the rest of the year.
Nordstrom has told its landlords that it will pay half rent for the rest of 2020 - AFP/Timothy A. Clary
The announcement came in a letter written by the retailer’s president of stores, Jamie Nordstrom, to involved property owners, which was obtained by Retail Dive. According to Retail Dive’s report, the letter also stipulated that Nordstrom will use store comps as the basis for any possible “true up rent payment, up to a full reconciliation should 2020 sales reach 90% of sales made in that location in 2019,” while also reassuring landlords that the company “will continue to maintain insurance coverage, pay utilities on which we are the account holder, and maintain your building(s) as required by the lease.”
The news follows Nordstrom’s confirmation of reports concerning a planned reduction in its workforce, a move which a spokesperson for the retailer said is part of a wider strategy to cut overheads by 20%, without specifying the number of employees who would be affected by the measures. A Sourcing Journal report published prior to Nordstrom’s confirmation of the strategy cited unnamed sources who stated that the job cuts could affect up to 25% of the retailer’s workforce, not counting associates who will be dismissed due to the planned permanent closure of 16 Nordstrom locations. In 2019, the department store chain’s workforce counted some 68,000 employees, including both full and part-time associates. In the first quarter ended May 2, 2020, Nordstrom’s net sales totaled $2.03 billion, down 40% from $3.35 billion in the prior-year period, while the retailer’s net loss came to $521 million, or $3.33 per diluted share, compared to net income of $37 million, or $0.23 per diluted share, in the first quarter ended May 4, 2019. The company attributed the declines to temporary store closures implemented in response to the coronavirus crisis, highlighting that it continued to see positive sales growth into February, before Covid-19 began its rapid spread in the U.S. Despite the disruption caused by the coronavirus, CEO Erik Nordstrom was still optimistic when the retailer announced its Q1 financial results at the end of May, affirming, “we’re entering the second quarter in a position of strength, adding to our confidence that we have sufficient liquidity to successfully execute our strategy in 2020 and over the longer term.” Nordstrom isn’t the only retailer holding out on rent payments in the wake of Covid-19, with both Gap and Ross having recently faced legal action due to their failures to fulfill their lease obligations.