The Retail Apocalypse And COVID-19 Are No Respecters Of Reputations: Just Ask Macy’s, Nordstrom And John Lewis

On both sides of the Atlantic, brick and mortar retail is under an existential threat, the likes of which it has never before faced. It is a well established fact that both the U.K. and U.S. retail sectors have been overspaced for far too long and let’s not forget that the reality was hitting long before the coronavirus pandemic hit. Essentially, we had all become “over-retailed”.

We really shouldn’t be surprised by any of this, after all, it’s not as if this has suddenly crept up on us, it’s been a trend for years. It’s just that what is happening now is in a different league. COVID-19 is having many far-reaching implications and one of them is on under-performing retail.

The retail apocalypse really doesn’t respect reputations, and it takes no prisoners, just ask the likes of Macy’s
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, Nordstrom
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and John Lewis. All three, respected and established retailers, all three being challenged like never before during the current crisis.

Last week, in common with other retailers whose shre price was depressed, Macy’s and Nordstrom closed down 15% and 12.2% respectively on the New York stock exchange. Macy’s were down despite efforts to realign expectations, demonstrating that investors remain incredibly nervous about the future for department stores.

Last month Nordstrom announced that it is to permanently close nearly 15% of its full line stores across the U.S. And here in the U.K. with all non-essential allowed to reopen from Monday June 15, John Lewis has reported that it is considering not reopening a number of its less profitable stores next week as part of a strategic review of the business.

And of course, the traditional shopping mall model means that these names are associated with being anchor tenants, and some of the closures which have been announced are in exactly that location, dealing a further blow to struggling malls and shopping centers.

But this is a very complex scenario. After being locked inside for months, it is perhaps to be expected that shoppers will initially return to stores, keen to grab not just a bargain but reacquaint themselves with the store experience.

Macy’s chief executive, Jeff Gennette said that sales at reopened stores are down around 50%, much better than the 85% anticipated. An exercise in trying to protect the share price? No doubt and of course, the real barometer of consumer sentiment will be in the coming weeks, as shoppers try the new retail experience.

And from next week we will begin to see if that trend is replicated on this side of the Atlantic. But it will take a good few weeks to work through at a minimum. Just how many will embrace it and how many will dip a toe in the water and then retreat to the relative safety of online, remains to be seen. Footfall figures have never been more eagerly awaited.

But there’s a reason why we cull and why we prune, retail will no doubt look and feel very different once we emerge on the other side of the pandemic and many well known names will have disappeared or shrunk to a shadow of their former selves. But that won’t necessarily be a bad thing, will it?