Coronavirus is growing enormously, leading to greater impacts every day. The pandemic has infected more than 400,000 people worldwide and the death toll has crossed 18,000. The retail sector is under major pressure, with companies shutting stores, limiting store hours and withdrawing their guidance. In fact, companies are also bound to keep stores shut for extended durations as the situation is worsening.
In connection with this, Nordstrom, Inc. (JWN - Free Report) said that it will prolong its temporary store closure plan for at least a week until Apr 5. All namesake stores along with Nordstrom Rack, Trunk Club, Jeffrey, Nordstrom Local and Last Chance stores will be shut across the United States and Canada. The company had originally closed all Nordstrom full-line, Nordstrom Rack, Trunk Club clubhouses and Jeffrey stores for two weeks, starting Mar 16.
Since then, the company has been making regular payments and offering benefits to all its employees associated with the store closures. The company intends to keep paying employees till Apr 5 and provide benefits throughout April. Well, store closures have been undertaken by several other retailers amid the coronavirus scare. Abercrombie & Fitch (ANF - Free Report) , Gap (GPS - Free Report) , Kohl’s (KSS - Free Report) and Guess?, to name a few retailers, have closed stores temporarily to contain the spread.
Nordstrom, in its Mar 16 release, said that it will continue to operate online through apps and sites — Nordstrom.com, Nordstromrack.com, HauteLook.com and TrunkClub.com. Markedly, the company generated about one-third of its 2019 sales from the online business, which clearly is a significant driver.
Also, the company recently announced ways to strengthen its position amid the economic crisis. To this end, it is suspending its quarterly cash dividend, starting the second quarter of fiscal 2020. The company is also suspending share buybacks. Nonetheless, Nordstrom, which ended fiscal 2019 with a healthy financial status, remains committed to long-term dividend payments. Further, the company is drawing $800 million from its revolving credit facility. Apart from this, it targets a reduction in operating expenses, capital expenditures and working capital to the tune of roughly $500 million, which will be incremental to its initial savings goal of $200-$250 million for fiscal 2020.
Simultaneously, the company also withdrew its fiscal 2020 guidance due to the growing spread of COVID-19. In its last earnings call, management had projected net sales for fiscal 2020 to increase in the range of 1.5-2.5%. Further, the company had envisioned earnings per share of $3.25-$3.50.
Shares of this Zacks Rank #3 (Hold) company have collapsed almost 62% so far this year compared with the industry’s decline of 52.7%.
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