Covid-19 grips US retail giants. Paychecks to staff stopped, millions file for unemployment allowance

The economic downturn that was inevitable after the Corona pandemic has started to kick in with millions of Americans filing for unemployment insurance over the past week. Lockdown and travel restrictions in countries across the world has set a domino effect in motion with companies in the US furloughing employees due to overwhelming loss of business and resulting drying up of cash flow.

Retail giant Macy’s is the latest to succumb to the economic distress. The brand, which owns 775 stores across the country and employs 125,000 people said in a statement it is going to furlough a majority of staff on rolls. The company had closed all its physical stores on March 18 as a preventive measure to stem the corona spread. In its statement, Macy’s said, “While the digital business remains open, we have lost the majority of our sales due to the store closures.”

Macy’s not the only one

Macy’s isn’t the only major company that is stopping the paychecks. Here are some of the major brands that have decided to layoff or furlough employees till the coast is clear and business is up and running again.

The company will furlough the majority of its store teams in the United States and Canada, pausing pay but continuing to offer applicable benefits until stores are able to reopen

Statement by the Gap Inc

The Cheesecake Factory announced it will furlough 41,000 hourly workers. Its executives will take a 20% salary cut.

Gap Inc said it anticipates the closures to extend past the previously announced April 1 date, as a result of continued measures to help slow the spread of COVID-19. “As part of this decision, the company will furlough the majority of its store teams in the United States and Canada, pausing pay but continuing to offer applicable benefits until stores are able to reopen,” it said in a statement.

Marriott International, the largest hotel chain the world is going for layoffs, furloughs and salary cuts. “Two-thirds of its 4,000 corporate employees headquartered in Bethesda, as well as two-thirds of its 174,000 corporate employees around the world would be furloughed for 90 days beginning in April,” executives told Fox News.

Hilton Worldwide holdings Inc said beginning April 4, many of Hilton’s corporate Team Members will have reduced schedules or be furloughed for up to 90 days. “President and CEO, Christopher Nassetta, will forgo his salary for the remainder of 2020. The Executive Committee will take a pay cut of 50 percent for the duration of the crisis,” it said in a statement.

Ganett, one of the largest media companies in the US, announced furloughs and layoffs across its products that include, among other titles, USA Today and Burlington Free Press. Daily Beast quoted an internal mail circulated by the company calling the move as a “collective sacrifice”.   

Other companies, which have taken “corrective measures” to plug the bleeding in their operation and maintenance costs, include General Electric (Aviation), L Brand (owner of Victoria’s Secret), Kohl’s Corp, Sysco Corp (Largest food distributor in the US), Bath & Body Works and Steve Madden Limited, among others.                   

Mass unemployment hits America 

The paychecks to millions of Americans are stopping even as President Donald Trump signed a 2 trillion-dollar economic stimulus package into law on Monday. According to Bloomberg, an estimated 500,000 employees would be without a recurring source of income following the furloughs by major retail chains and industries across the US. 

A report by Fox Business says, 3.3 million Americans have filed for unemployment insurance last week resulting in a spike in the number of unemployed across the country.

Covid 19 has had more severe and sudden financial impact on our business than 9/11 and the 2009 financial crisis combined

Arne Sorenson

The furlough factor

What does furlough mean?

Furlough essentially refers to sending an employee on an unpaid leave of absence. This is different from layoff, which refers to severance of an employee with the company concluding in full and final payout. When an employee has been furloughed, he or she continues to remain on company rolls and stands a chance to be recalled to active work in future. Most companies are resorting to furloughs as a “temporary measure” to tide over the economic downturn set in motion by the Corona pandemic that has forced closure on businesses. 

Companies that have announced furloughing of their staffers have decided to continue the health and other benefits accruing out of their employee contracts for a limited period. Most companies like Macy’s and Gap have assured the furloughed employees their health benefits and said they would continue through May/June.

Whether furloughed employees can avail unemployment benefits is state specific and varies from government to government.

Worse than 9/11 and 2008-09 recession

Top executives said they are bracing for a hard crash and are taking pre-emptive measures to keep the businesses rolling with minimal staff. President and CEO of Marriott, Arne Sorenson took to twitter to address stakeholders and employees on the profound impact Covid-19 is having on businesses. Sorenson said the Covid-19 pandemic has had ” more severe and sudden financial impact on our business than 9/11 and the 2009 financial crisis combined. “

Foreign Policy offered the grim picture as a result of the Corona-induced global financial meltdown. It said, “The last global economic crisis was a financial heart attack. This one might be a full-body seizure.”