New York (AFP)
A stop at Macy's department store, located two blocks from the Empire State Building, is often on the list of tourist activities in New York. But visitors may have to find another shopping temple in the heart of Manhattan after the coronavirus pandemic is over.
Macys', also owner of the Bloomingdale's brand, is currently fighting for its survival, like many department stores, forced to close their shops and lay off thousands of employees.
The shock caused by this health crisis is so severe that many experts wonder if they will recover, because their income has been swallowed up.
Sales of clothing and accessories stores halved (-50.5%) in March according to the US Department of Commerce, a movement that should accelerate in April, a month very affected by containment measures to stem the spread of Covid-19.
- Bankruptcies -
"There will be bankruptcies (because) we do not need as many department stores, or stores as huge," said Robert Burke, expert expert at Robert Burke Associates.
At a time when it should be busy with collections and summer items, Macy's is more concerned with raising billions of dollars to stay afloat, according to banking sources.
The famous chain was forced in March to lay off the majority of its 130,000 employees after closing all its stores.
"We lost the majority of our sales," said Macy's, who also froze new hires and canceled orders.
It is not certain that the brand is recovering due to the uncertainties surrounding the resumption of economic activity and the future behavior of consumers, some of whom have lost their jobs.
The rating agency S&P therefore lowered the financial solidity rating, believing that the extension of social distancing was likely to put Macy's at the wall.
A cascade of department store bankruptcies is not excluded if the stores remain closed in the coming months.
The JC Penney and Nordstrom banners can only last eight months financially, calculated the Cowen firm.
The situation is even more alarming for Kohl's, who can only resist for five months, while Lord & Taylor is already exploring different restructuring options.
Bending under a huge debt, the luxury department store Neiman Marcus, also owner of Bergdorf Goodman, could be the first domino to fall.
He could not honor a due date of his debt recently, which pushed S&P to warn the creditors that "the company will not honor future due dates of payments and will seek to restructure out or in court".
The rating agency refers to Chapter 11 of the US bankruptcy law allowing a company to restructure, often at the cost of massive job losses, without pressure from its creditors.
- Weddings? -
Symbols of the American consumer society, department stores have been the engines of giant shopping centers ("mall") which have swarmed in the United States until the explosion of online commerce.
Their decline, which began a decade ago, was precipitated by the success of Amazon and "fast fashion" (H&M and Zara).
One knee on the ground, department stores have sought to reinvent themselves by developing online business platforms and creating unique experiences - yoga classes, beauty spots, pop-up bars, etc. - within their stores, but they remained too dependent on physical sales.
This harsh reality led to the bankruptcy in 2019 of the New York department store Barneys, a historical reference in men's fashion, while Sears is now controlled by a hedge fund.
L Brands, owner of the iconic lingerie brand Victoria's Secret, has just given an appointment before the judges to a fund that bought it in February after the latter announced that it wanted to cancel the promise to sell.
The post-crisis landscape is that of a sector made up of fewer department stores, one to two in town versus five on average before the pandemic, says Robert Burke, especially since brands will want to find new distribution channels for their products.
"It is time for department stores to consider mergers and acquisitions," enjoins, in a report released in April, the firm Mckinsey.
© 2020 AFP