The National Retail Federation on Wednesday called for the federal government to step in to support retailers coping with a serious downturn in discretionary spending as consumers protect themselves against COVID-19, a disease caused by a member of the coronavirus family. The group called for mandatory default and foreclosure stays or federally ordered rent abatement to relieve retailers faced with closure orders.
The group also suggested government-backed loans and tax relief, including reinstatement of the net operating loss carryback, (previously eliminated in President Donald Trump's tax overhaul), assistance with payroll costs, and expansion of employee retention tax credits to retailers with financial losses related to the decline in purchases of most goods beyond food and other essentials.
In a letter to President Trump, Treasury Secretary Steven Mnuchin, Senate Majority Leader Mitch McConnell, Senate Minority Leader Charles Schumer, House Speaker Nancy Pelosi and House Minority Leader Kevin McCarthy, NRF also warned that their decisions this week "will have lasting effects on our businesses, our associates and the communities we serve," in light of retail's position as the largest U.S. private sector employer, with some 52 million workers.
Consumer sentiment was already cooling this year, as seen in February's tepid retail sales report, and the COVID-19 pandemic has only added more ice.
Most retailers that don't sell food, medical supplies or other essentials have temporarily shuttered stores in order to help foster social distancing, which has emerged as public health officials' prime recommendation for stemming the spread of the virus. Even grocery stores and mass merchants have limited their hours. Many have pledged to continue to pay workers, at least for a few weeks. As a result, retailers, particularly specialty stores and department stores, and the malls they are in, face great uncertainty.
"Labor and benefit obligations, rents, loan payments are all crippling burdens if no sales are being made for days or weeks at a time, and our members are suffering cumulative losses that amount to tens of billions of dollars a week," NRF CEO Matthew Shay wrote in the letter to congressional and White House leaders.
The pressure on retail prompted warnings from analysts this week as well. UBS analysts led by Jay Sole in an emailed note this week called the situation "uncharted territory," with "all major retail markets ... affected to some degree."
"We think COVID-19 poses the biggest problems for companies with large US brick & mortar exposure, low EBIT margins, and high debt," Sole said.