Retailers face reckoning as April's sales drop sets a record
The outbreak of the coronavirus has dealt a shock to the global economy with unprecedented speed. Following are developments Friday related to national and global response, the work place and the spread of the virus.
TEUTONIC SHIFT: Germany — Europe's biggest economy — drifted into a recession in the first quarter as shutdowns there and beyond started to bite. The 2.2% decline in the first three months of the year was the second-biggest quarterly decline since Germany was reunited in 1990, exceeded only by a 4.7% drop in the first quarter of 2009 at the height of the global financial crisis.
FACTORIES RUNNING: China factory output rose 3.9% in April from a year earlier, an improvement over the previous month’s 1.1% contraction. China’s virus-battered economy is reopening, but job losses depressed consumer spending, a key driver of growth, challenging the ruling Communist Party effort to revive normal activity.
FACTORIES IDLED: American industry suffered the most severe plunge on record last month with factories, mines and utilities battered by the coronavirus pandemic.
The Federal Reserve said Friday that its industrial production index tumbled a record 11.2% in April. Manufacturing output also posted a record drop — 13.7% — as production of cars, trucks and auto parts plummeted more than 70%. Production of aerospace and other transportation products, metals and furniture fell around 20%. Output dropped 6.1% at mines and 0.9% at utilities.
SHOPPERS STAY HOME: U.S. retail sales tumbled by a record 16.4% from March to April as business shutdowns caused by the coronavirus kept shoppers away, threatened the viability of stores across the country and further weighed down a sinking economy.
Office Depot unveiled a restructuring plan that includes 13,100 job cuts, closing stores and consolidating distribution centers. The chain, which operates about 1,400 stores, said the restructuring will be complete by the end of 2023.
Nike acknowledged that despite an aggressive shift to online sales, stores shuttered by the pandemic will have a material impact on wholesale operations in the final three months of the year.
Stores have largely opened in China and South Korea, but traffic has been limited.
PAYING THE PIPER: J.C. Penney Co. made a $17 million interest payment Friday after skipping last week's payment. A non-payment would have put Penney into default. Penney skipped an earlier interest payment of $12 million in mid-April, kicking off a 30-day grace period. The payment comes as reports are swirling around an expected bankruptcy filing. Neil Saunders, managing director of GlobalData Retail, says Penney needed to show “good faith” if it wants cooperation of lenders.
ALL DRESSED UP: Amazon is striking a more fashionable pose to help out up-and-coming designers hurt by the coronavirus pandemic. The online shopping giant has teamed up with Vogue magazine to sell fashions from 20 brands, such as $500 cashmere hoodies by Ryan Roche and $350 silk pajamas Morgan Lane. As part of the initiative, Amazon opened a special storefront on its site, called Common Threads, and donated $500,000 to a fund started by Vogue and the Council of Fashion Designers of America to give grants to designers affected by the pandemic.
NOT SO FRIENDLY SKIES: How weak is international air travel? Singapore Airlines said Friday that traffic in April fell 99.5% from a year earlier. Even after cutting service by more than 95%, the average flight was only 9% full. The parent company also operates regional carrier SilkAir and budget airline Scoot.
NEWS BLUES: Media layoffs and furloughs continue as ad revenues have cratered this year because of the coronavirus pandemic. Thousands of journalists have lost their jobs, been furloughed or had pay slashed this year, and there were several hundred more cuts announced this week.
On Friday Vice, a TV and digital news organization aimed at younger people, announced 155 layoffs globally. Earlier in the week came furloughs and layoffs from digital publishers Quartz and BuzzFeed, magazine giant Conde Nast and the company that owns the business-focused The Economist magazine. Not all of the layoffs are journalists; many are on the business side. U.S. newsrooms have shrunk by a quarter in the past decade, even before the virus hit, with the steepest decline at newspapers, according to Pew Research.