In post-coronavirus planning, Nordstrom’s management is taking the lead by announcing a major restructuring of the company and the closing of 16 full-line stores.
Among the closings are stores located in Annapolis, Maryland; Miami and Naples Florida; Flatiron Crossing, Colorado; Chandler, Arizona; Short Pump Town Center in Richmond, Virginia; Hurst Texas; Happy Valley Oregon; and West Farms, Connecticut. In California, stores in Santa Barbara, Riverside, Escondido, Pleasanton, Sacramento and Montclair will not reopen. The store in San Juan Puerto Rico will also not reopen. It is anticipated that some associates will not be recalled. Some Rack stores might also not be reopened.
This means that the company will operate 100 full-line stores instead of the 116 they operated before the COVID-19 pandemic hit and forced the chain to close on March 19. There were 30 stores in California and now there are 24. It is still Nordstrom’s biggest market.
An important objective of the restructuring Nordstrom has undertaken is to add greater flexibility, and especially speed, to their operation. Their planned changes affect regional management, support roles, and the overall corporate organization. It is expected to save about $150 million, or 30%, of the company’s announced plan for a net cash reduction of more than $500 million.
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The company will then reopen remaining stores selectively where they are permitted to open. However, it is important to customers that the stores focus on increased cleaning and sanitation, conducting health screening of employees, providing face coverings for associates and customers, and even modify fitting room experiences (I note that some store managements teams have eliminated fitting rooms for the time being). In addition, there is need to continue popular curbside services, and keeping tried-on or returned merchandise off the selling floor for a period of time, etc.
The restructuring of Nordstrom clearly has many aspects as the company plans reopening of the full line stores where states allow that action. What will other stores do? How will they follow this move? Here is what I see happening.
We have seen several companies ask for various types of court protection under Chapter 11 of the bankruptcy law. Among them: Neiman Marcus, J.Crew, and John Varvanos. Other companies, such as Ascena Group and JCPenney are suspected of going the Chapter 11 route soon as well. In some cases, companies like Gap plan to reopen 800 stores in the near future.
I believe that at this last moment JCPenney may be aided by mall owners to stay out of bankruptcy. Mall covenants with smaller tenants promise two anchors stores in their leases, and it is unlikely that they want to go into renegotiations of these leases because of the absence of a major anchor store. JCPenney has only until May 15 to find a solution, since they have not paid interest on their outstanding loan of $2.5 billion, which is due next year. I think they will find a silver lining thanks to the challenges so many malls face.
Neiman Marcus’ plan, as they announced in their bankruptcy filing, indicated that they intend to exit bankruptcy in the fall of 2020. However, their debt of $4.5 billion is staggering, and WWD says that the stores owe millions of dollars for goods that were shipped. The company owes trade creditors about $200 million. With a restructuring plan in place, one hopes that it will be a fresh start for the company. CEO Geoffroy van Raemdonck has indicated that existing management will remain with the company through the bankruptcy proceedings and that he is looking for an improvement. While most Last Call outlet stores have already been closed, My Theresa has been set apart as a free-standing company and is not part of the bankruptcy proceedings.
Macy’s will reopen stores as will many other retailers. Dillard’s, one retailer that never closed all of their stores, will continue to operate as a concerned retailer with sanitation and cleaning a high priority to serve their shoppers.
Many more stores are looking at their fleet of stores and examining the feasibility of closing some units. I expect Macy’s, JCPenney, and Kohl’s to follow Nordstrom’s example. This is the time to cut the excess baggage that some stores left unaddressed for too long. After all, shopping will differ in the future as we have all learned that the internet offers new shopping opportunities.