The retail sector is reopening. It is also taking stock of what is left.
JCPenny entered bankruptcy last month as a result of the shutdown from the coronavirus. The department store chain was always on shaky ground before their revenue stream dried up due to the shutdown.
The company's goal is to emerge from bankruptcy as a smaller, learner department store chain.
Today, it announced the stores that will be closed, with the process starting as soon as June 12th. It is expected to take 10-16 weeks to finish the process.
Before the virus hit, JCPenny had 860 stores. Thus far, 500 were reopened.
The retail sector was under fire for more than a decade. We saw a transition to online sales, pushing near 25% during the pandemic. Amazon is often blamed for causing the pain yet most of the companies in trouble failed to make the necessary changes.
Wal-Mart and Best Buy were two companies that were not early online adopters. That said, they dedicated themselves to achieving that end and, now, are fairly successful. They are holding their own in the "new" retail world.
After the close of the market, The Gap announced their earnings. They saw a 43% drop in sales during the first quarter.
Like JCPenny, The Gap is reopening their stores. Thus far, more than 1,500 or 55% of their total, are open for business. The chain is looking to get the others open as soon as it is safe to do so.
After getting hit by the viurs, The Gap also had a number of stores affected by the riots. According to the CEO, there were 20 locations that were affected.
On a positive not for the company, online sales were up 13% in the first quarter over a year ago.
The retail sector is one that is going to be scrutinized to determine how quickly the economy is recovering. Many feel the economy is in rough shape while the stock market rides near all time highs.
Since the consumer makes up 70% of the economy, the health in this area is vital. Retail sales are often an indication of how willing people are to part with their money. During the lock down, the savings rate jumped to more than 5%. This is normal when people are fearful.
Behind the scenes, there is also a great deal of conflict between retailers and landlords. Simon Property Group sued The Gap for back rent since the company stopped paying during the shutdown.
It will be interesting to see how this all resolves itself.
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