J.C. Penney filed for bankruptcy on Friday, the latest and largest retailer to fall during the coronavirus pandemic.
Its collapse follows other retail bankruptcies this month, including J Crew, the Neiman Marcus Group and the designer clothing brand for men John Varvatos. But J.C. Penney represents by far the biggest victim according to the number of sites. More than 800 stores are the anchors of many American shopping centers, with nearly 85,000 employees.
The filing was scheduled after J.C. Penney failed to make interest payments on his debt in April to “maximize financial flexibility,” and then skipped another payment last week. Stock for the retail chain, which is based in Plano, Texas, has traded at less than $ 1 per share for most of this year, Sapna Maheshwari and Michael Corkery write.
Sales of the company have declined steadily in recent years to $ 10.7 billion for the year ended February 1, when it posted a net loss of $ 268 million from continuing operations. At the time, he reported having 846 stores in the United States.
Ten years ago, J.C. Penney continued to experience declines, but sales were $ 17.6 billion and revenues were $ 249 million from continuing operations. At the time, it had more than 1,100 stores and 154,000 employees.
Markets end the week down as investors assess the economic picture of the outbreak.
It was a week of adverse statements and grim economic data that caused investors to focus on the major challenges facing the US economy.
Friday was no exception and stocks were volatile for most of the day after new data showed how devastating the impact of the coronavirus pandemic was. had been at retail.
After a sharp drop early in the day, the S&P 500 rebounded, ending the day with a gain of less than 1%.
Nevertheless, thanks to consecutive drops on Tuesday and Wednesday, the index experienced its largest weekly decline since the end of March, a decline that stands out after a long period during which equity investors seemed ready to look beyond the deeply negative prospects for the economy and the uncertain path of the coronavirus epidemic.
Tuesday, the country’s largest infectious disease specialist, Dr. Anthony S. Fauci has warned lawmakers that over-rapid reopening of large swathes of the US economy, which had been shut down in an effort to control the epidemic, could reignite the epidemic. His comments led to a stock market liquidation, which closed 2%.
“Fauci / Powell’s boost is that the road ahead is likely to be rocky – perhaps rockier than the market hoped for,” wrote William Delwich, investment strategist at Baird, a Milwaukee-based financial firm, in an email. .
In the midst of all this, a parade of economic reports continued to show an economic slowdown of breathtaking speed and scope.
The prices of other “safe” investments – such as treasury bills and gold – remain high, suggesting that some investors are still not convinced that the market recovery is sustainable.
“As in January and early February, the stock market is ignoring the warning signals sent by asset movements of the” safety leak “,” said Matt Maley, chief market strategist at Miller Tabak, a trading and asset management company.
the The Federal Reserve used its annual Financial Stability Report to raise the alarm about weaknesses that could worsen the impact of stock markets – which could then spill over into the rest of the economy – as coronavirus blockages slow growth, spurring job losses and causing businesses and consumers to miss rents and mortgage payments.
The financial system “amplified the shock” in March, the central bank said Friday, as the short-term finance markets in particular grabbed hold. According to the central bank report, some hedge funds have been “badly hit” and “may have” contributed to market disruptions.
Businesses have entered the debt-ridden crisis, said the Fed. Banks started out well capitalized, but lower interest rates and the potential for credit losses could affect their profitability and their ability to replenish this capital.
“Economic activity is contracting sharply, and the reduction in profits and the resulting increase in credit, necessary to overcome the recession, will increase the debt burden and the risk of default of a heavily indebted business sector” , indicates the report.
Wall Street prevents some small businesses from asking for help.
When Michael Sullivan borrowed $ 22 million from a specialist Wall Street lender in 2018 to buy and renovate two hotels in Florida, he had no idea how much would this decision cost.
He discovered it recently, after visitors stopped coming to his properties because of the pandemic, which prompted him to seek help from the federal government’s new small business loan program. But first, he had to fight with his lender, the credit fund Benefit Street Partners, just to get permission to get the government loan. The legal struggle cost him thousands of dollars and a month of lost time.
The CARES Act, which created the government’s paycheck protection program that Mr. Sullivan borrowed, prohibits any loan from being controlled by other lenders. At the same time, it does not prohibit lenders like Benefit Street from enforcing existing contracts with borrowers seeking public funds.
The $ 650 billion program has helped millions of small businesses, but its deployment has been uneven and slowed down by confusing rules. The very structure of the program created other challenges. For companies like Mr. Sullivan’s, the structure of the program has forced them to fight expensive legal battles just to get the money.
April could turn out to be the bottom. March’s figures were helped in part by panic purchases, and stores were generally open for the first half of the month. Most states have started to remove barriers to trade and traffic, and many economists expect spending to increase in May as people venture out.
But any rebound is likely to be gradual. There is no guarantee that customers will return to the numbers previously seen – and even if Americans feel comfortable shopping, they may not have as much money to spend, as millions of people have lost their jobs.
“It’s probably fair to say that the worst is over in terms of collapse, unless there are waves of new epidemics,” said Jim O’Sullivan, US chief macro strategist for TD Securities . “But how fast is it coming back?” The short answer is that none of us really know. “
The slowdown may have left lasting scars. J Crew and Neiman Marcus have filed for bankruptcy, and other large retailers like J.C. Penney, which employs approximately 85,000 people, is expected to follow.
The collapse of the retail trade is both the result of and a major contributor to the economic crisis. The second largest private sector employer in the country, after health care, the retail sector cut 2.1 million jobs in April.
Commerce Department Retail Sales Report for April Shows dizzying declines in some industry sectors. Higher sales at grocery stores and online retailers failed to offset declines elsewhere.
Restaurants and bars have lost half of their activities in the past two months.
Sales in furniture stores fell by two-thirds.
Clothing stores have seen sales fall 89% since February. This dive shows how many retailers have remained dependent on physical outposts, even if the Internet has changed the business landscape.
As the pandemic continues, Wall Street bankers, Uber drivers, academics, artists and many other adults have reluctantly turned into boomerang children, uprooting their independent life and migrating to the house. Some had partners, children, and pets. More than a few wondered if they had the virus, but still risked moving in.
There were people who fled dense cities for the bucolic suburban homes where they grew up and the promise of homemade meals and free laundry. Others ended up in small spaces designed for empty nesters or in apartments already shared with other family members, such as grandparents or school-age siblings.
Parents caught in the swell of layoffs, vacations and canceled contracts found themselves feeding adult children who were in the same situation. Mothers who got used to freedom had to back to the kitchen and cleaning. Shorts, cat food, headphones and other items had to be purchased because the new residents had not packed enough to last during the extended lockout; their abandoned apartments had to be cleaned up when the leases started to expire.
“Some parents see this as a welcome surprise, but it can also add a lot of tax pressure,” said Lindsey Piegza, chief economist at investment bank Stifel. “You cannot assume that parents are necessarily in a better position than their adult children.”
But young workers are “notoriously poor savers,” she said, and many were taken without funds for the rainy days during a devastating economic storm. Multigenerational quarantine was often the only viable option, although a potentially dangerous given the risk of spreading the virus in confined spaces.
These figures, combined with a downward revision of the economic growth account at the end of 2019, mean that Germany has entered a recession.
The German government, which released the data on Friday, said the hardest hit came in March and likely worsened in April, when consumer spending, capital investment and exports – one of the main drivers growth in Germany – fell off a cliff.
“Things will get worse before they get better,” said Carsten Brzeski, chief economist for the euro area at ING, in a note to clients.
The worst of the pandemic is starting to ease, Germany and other countries are slowly easing their closings, but Germany’s contraction has reminded that even if the virus wears off, economic spinoffs could put pressure on the economy. European and global economy for months or years.
The European Commission has forecast that the EU economy will shrink 7.4% this year, the worst recession in its history.
Chinese factories maintained a steady pace last month, but Chinese consumers were slow to resume shopping, according to official statistics released on Friday.
Many countries have been following China’s economic performance closely since it is several months ahead of the rest of the world to deal with the virus. Chinese economy declined in the first three months of this year for the first time since Mao Zedong’s death in 1976.
Factories caught up on orders they had struggled to fill earlier this year when the coronavirus pandemic crossed the country. Industrial production in the country increased 3.9% from April last year, better than most economists had hoped. Production fell 1.1% in March from a year earlier and plunged in February when the virus epidemic was at its worst in China.
But purchases and capital investment remained weak. Retail sales fell 7.5% in April from a year earlier, slightly less than economists forecast.
“We must be aware that given the continuing spread of the epidemic abroad, the stability and recovery of the national economy still face multiple challenges,” said Liu Aihua, director general of the Department of full agency statistics.
Strong exports occupied factories last month. Many factories were catching up on orders while Chinese cities were closed. But orders for new exports are stalled, according to surveys of purchasing managers.
Despite the progress, tens of millions of migrant workers are unemployed. Many white-collar workers have suffered wage cuts. Low consumption has led some economists to wonder how long China can sustain an economic rebound.
Catching up: here’s what else is going on.
Ultra petroleum, which produces oil and natural gas in Wyoming, filed for bankruptcy on Friday, its second in four years. Burdened with debt, the company struggled before the pandemic brought down oil prices.
Consumer spending on video games, hardware and accessories hit a record $ 10.86 billion in the first quarter of 2020, up 9% from the same period last year, according to NPD Group data. The increase occurred as millions of Americans sought distractions while being ordered to stop to spread the coronavirus. Games like Animal Crossing: New Horizons, Call of Duty: Modern Warfare and Doom Eternal were the best titles, and Nintendo The Switch console was a big seller.
Vice Media will fire 100 employees worldwide and 55 in the United States, general manager Nancy Dubuc said in an email on Friday, citing both the pandemic and more general negative trends in digital media. “Some difficult decisions had to be made mainly around our digital teams,” said Ms. Dubuc, who took over the management two years ago. Vice had previously instituted four-day work weeks for three months for employees earning more than $ 100,000 in response to the pandemic, with additional pay cuts for employees and senior executives.
The reports were provided by Clifford Krauss, Ben Casselman, Sapna Maheshwari, Tiffany Hsu, Emily Flitter, Marc Tracy, Mohammed Hadi, Liz Alderman, James B. Stewart, Kevin McKenna, Matt Phillips, Adam Satariano, Gregory Schmidt, Carlos Tejada and Daniel Victor.