Urban Outfitters on Tuesday said it won’t pay rent for an undisclosed amount of time and is delaying the opening of new stores, while existing stores remain "temporarily closed until further notice due to the continued spread of COVID-19."
The company, whose brands include Anthropologie, Free People and Urban Outfitters, also said that beginning Wednesday "a substantial number of store, wholesale and home office employees" will be furloughed for 60 days, but will continue to get benefits. The retailer will also reduce senior leadership compensation during that time, eliminate board cash compensation for the rest of the fiscal year and suspend stock buybacks "for the foreseeable future," according to a company press release.
Other measures include a freeze of hiring and bonuses for the year and a delay in merit raises; borrowing $220 million; saving $100 million via project delays or cancellations; requests for payment delays or price concessions on inventory orders; cuts to non-payroll expenses like creative, marketing and travel; extension of payment terms to vendors; and a pullback on expansion plans in China and for its Nuuly rental brand.
Urban Outfitters joins restaurant chain Cheesecake Factory in plans to withhold rent, as stores, locked up as part of a global effort to check the spread of the COVID-19 pandemic, remain empty and bereft of sales.
In a statement, CEO Richard Hayne said it was the first time the company has resorted to a furlough. While e-commerce may have been a strengthening contributor to Urban Outfitters' revenue in recent quarters, that's not yet to the point of making up for the losses in stores. "Even though our digital business continues to operate, the store closures and lower overall demand require a smaller workforce to support the business," he said.
The company, in saying that it's forced to shore up its finances in order to be there when the crisis ends, may be among the first retailers to hold back rent payments to that end, but it's not likely the last. Credit Suisse analyst Michael Binetti, in emailed comments on Urban Outfitters and other apparel retailers, said that people in real estate have told him they are bracing for the possibility. That looming risk has already prompted mall owner Taubman to remind retailers of their obligations.