Retailers that are shuttering stores.
As coronavirus continues to plague the markets, businesses both big and small are being forced to make hard decisions about their futures. Many retailers have made the difficult choice of closing their doors to protect their employees at the cost of sales. In some cases, there's no choice since local governments continue to shutter nonessential businesses. Many publicly traded retailers are about to take a big hit to their bottom lines, and investors need to know which companies are making a tough call during this time of uncertainty. Here are seven large retailers that have chosen to close their stores during the outbreak.
Apple (ticker: AAPL)
First, Apple shut down all 42 of its stores in China at the end of January. Then Apple announced that disruptions to its supply chain in China thanks to factory shutdowns would hurt its iPhone supply, and therefore its quarterly revenue. Since then, Apple has reopened all its Chinese stores, but on March 13, the tech giant announced it would close all of its Apple stores outside of China. Originally those stores would reopen on March 27, but now Apple has declared that they will stay closed indefinitely. For any other company, closing hundreds of stores would be bad news indeed but considering AAPL had gross profits of more than $35 billion last quarter and more than $207 billion in cash, Apple should be able to weather this storm just fine.
Apple isn't the only company feeling the burn of the coronavirus in its supply chain as well as its retail stores. On March 15, Nike announced that all stores in the United States, Canada, Western Europe, Australia and New Zealand would be closed through March 27 due to COVID-19. That's a hard blow for Nike, but what may have a more dramatic effect on profits are disruptions to its supply chain. Twenty-three percent of Nike footwear was produced in China in 2019, and 27% of Nike apparel was made there as well. With the recent upheaval in the Chinese manufacturing industry, it's a given that the world's largest sports apparel maker will have some production problems in the coming weeks.
TJX Companies (TJX)
TJX was proud to note that 2019 marked not only the 24th consecutive year of annual comparable store sales increases, but it also marked yet another year of dividend increases for the retailer. Unfortunately, both of those records are likely about to come to an end -- the company is closing all stores, including TJ Maxx and Marshalls, in the United States, Canada, Europe, and Australia until April 2. In terms of the current state of play, TJX is suspending its share repurchase program, reducing all capital expenditures and evaluating its dividend program to make sure it has enough money to endure this crisis. The cherry on top: TJX is also temporarily shutting down its online businesses at tjmaxx.com, marshalls.com, and sierra.com. So not only will TJX lose out on regular retail business for at least two straight weeks, but it also won't be able to make up for those lost sales with online retail, a brutal double whammy.
L Brands (LB)
L Brands said on March 17 that all its Victoria's Secret, Bath & Body Works and Pink stores would be closed through March 29. But it's been closing stores since before COVID-19 arrived -- L Brands shuttered 53 Victoria's Secret locations in North America in 2019, as the company prepares to take Victoria's Secret private and spin Bath & Body Works into a stand-alone company. That transition became a little trickier when L Brands announced it was also closing its Victoria's Secret and Pink online platforms, as the company suspended all e-commerce orders and delayed any orders that have already been made. That's going to make investors and customers alike unhappy. L Brands will probably want to get Victoria's Secret off its books as soon as possible.
Macy's announced on March 17 that it was closing all its stores, including all Bloomingdale's and Bluemercury locations, through March 31. But Macy's shareholders have become used to store closures, as the company has shuttered roughly 40% of its total stores in the last five years. Just earlier this year Macy's announced it was closing another 125 locations or about 20% of its remaining stores over the next three years as it renews its focus on profitability at remaining stores, especially at Macy's Backstage. But now Macy's is also suspending its quarterly cash dividend, tapping into its credit lines, and "reviewing all non-essential operating expenses and reducing 2020 capital expenditures." While Macy's was beginning to look like a decent value investment, you may want to wait out the storm before putting your money on Macy's.
Like Macy's, Kohl's has taken drastic steps in light of the coronavirus outbreak: The company closed all of its stores until April 1, and it has tapped into a $1 billion credit line. It's also evaluating its dividend. But coronavirus isn't the only cause for concern at Kohl's. The company reported lower sales than expected during the holiday season despite a partnership with Amazon (AMZN) that allowed customers to return Amazon purchases at Kohl's stores. Kohl's also announced a flat fourth quarter at the beginning of March. On the bright side roughly 25% of Kohl's sales came from its online store and app, which means the money will keep rolling in despite store closures. Still, in the company's last earnings call, executive vice president Jill Timm noted that 2020 would be "a year of stabilization for us," but that appears less and less likely by the day.
Nordstrom joined the chorus of closing retailers on March 17, announcing it would shut down all 380 of its stores through March 31; it's also "making further reductions to its expense and capital expenditure plans and is currently suspending share repurchases." Unlike other retailers, Nordstrom hasn't had to close stores to cut costs these last few years -- it actually expanded its store count in 2019, and its off-price options at Nordstrom Rack continue to bring in profits. Nordstrom's online and app platforms also drove a third of its sales for the 2019 fiscal year, and online sales increased 7% over that year. The combination of a solid brick-and-mortar business plus a robust online presence may make all the difference for Nordstrom's survival going forward.
Retailers that are closing up shop during the pandemic:
-- Apple (ticker: AAPL)
-- Nike (NKE)
-- TJX Companies (TJX)
-- L Brands (LB)
-- Macy's (M)
-- Kohl's (KSS)
-- Nordstrom (JWN)
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