Nordstrom could become a major retail victim of COVID-19 if the pandemic forces the company to keep its stores closed for much longer, according to a securities filing with the SEC. The retailer already has felt a “substantial impact” on its business, and the company expects its Q1 2020 results to be “adversely impacted in a significant manner.”
“While the company continues to generate sales and clear excess inventory by fulfilling customer online orders from both its physical stores and its fulfillment centers, we are uncertain when we will be able to reopen our physical stores to customers,” said Nordstrom in the filing. “The longer our stores remain closed to the public, the greater impact it will have on our results of operations and financial condition, and if our physical locations remain closed to customers for an extended period of time our financial situation could become distressed.”
Nordstrom has been taking precautions to weather its store closures, such as furloughing a “portion” of corporate employees and seeking a reduction of more than $500 million in operating expenses, capital expenditures and working capital in late March. Its measures have since expanded to include the furlough of a “majority” of its staff and the closure of two distribution centers to comply with shelter-in-place orders, and the company could face further financial repercussions as the outbreak continues.
“The disruption to the global economy and to our business, along with a sustained decline in our stock price, may lead to triggering events that may indicate that the carrying value of certain assets, including inventories, accounts receivables, long-lived assets, intangibles, and goodwill, may not be recoverable,” said Nordstrom in the filing. “The further spread of COVID-19, and the requirement to take action to limit the spread of the illness, has had, and may continue to have, a material adverse impact on global economic conditions, our business, results of operations and financial condition, including on our potential to conduct financings on terms acceptable to us, if at all.”
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The company had reported low sales in markets where it remained open during the first half of March, and its e-Commerce sales have not been able to pick up the slack. Some of the other challenges identified in the filing include the potential for a wider economic downturn in the U.S., which would hinder Nordstrom’s sales further, and the wider downturn in mall traffic.
Nordstrom, which had previously been faring better than some other department stores, should have enough cash reserves to last six months with its stores closed, according to a Cowen & Co. study cited by CNBC. In comparison, Cowen believes struggling retailers like Kohl’s and Macy’s only have the reserves to remain functional for five months. Richard Kestenbaum, a Triangle Capital Co-Founder and Partner, recently wrote a piece for Forbes titled Coronavirus Could Be What Finishes Off Several Big Department Stores.
