The future is clear. The “Greatest Depression” has begun.
Go back to March when the global lockdown began. Remember the Main Street refrain, “It will come back”?
Remember the Wall Street forecast, “A V-shape recovery”?
The facts are in the numbers.
Shut down economies that were already going down will not “come back” or have a V-shaped “recovery.” Instead, they will instead sink much deeper… and downward much faster.
Here are some indisputable facts that add up to economic hardship.
Wells Fargo Shake-Up Aims to Restore Vanishing Profits. The bank, which employs some 263,000 workers worldwide, is considering cutting thousands of jobs this year, closing branches, and will cut its third-quarter dividends to comply with new Federal Reserve rules limiting them.
The third largest U.S. bank also has set aside several billion dollars in additional loan loss reserves, leaving it with a second-quarter profit of $9 million, compared with $6.2 billion a year previous.
Wells Fargo also is still recovering from a 2016 scandal in which it created new accounts for existing customers without their knowledge or permission, charging fees for the new accounts.
Setting up the new accounts earned bonuses for employees.
The scandal destroyed the bank’s reputation, lost it thousands of customers, and cost it $3 billion in fines. Wells Fargo also is hobbled by regulatory strictures that, among other things, limit the size of its assets and liabilities.
The sizeable number of job cuts would be the first among major U.S. banks since the economic shutdown was imposed.
Harley Davidson Riding Hard Times. The Milwaukee-based motorcycle company will cut 13 percent of its global workforce, or about 700 jobs out of 5,600 worldwide, to save roughly $42 million in costs.
The company’s U.S. sales have been declining for years, and Harley is seeking ways to become a leaner organization.
Harley recently replaced its CEO with a board member who has reopened factories on a reduced production schedule and slowed the introduction of new models.
Harley says the job cuts are part of a strategic plan and not a response to the global economic shutdown.
The company said it will reveal details of its plan to refashion the company when it reports earnings this month.
Harley’s shares rose 0.6 percent after it announced the job cuts.
New York & Co. Goes Bankrupt. RTW Retailwinds, the parent company of women’s clothier New York & Co., filed for Chapter 11 bankruptcy and will close most, and perhaps all, of its 378 stores scattered across 32 states.
The company also may sell its e-commerce operation and intellectual property. More than 90 percent of the company’s stores have reopened and conducting liquidation sales.
RTW announced in June it was likely to default on a loan and probably would go bankrupt.
Bed Bath & Beyond to Close 200 Stores. Bed Bath & Beyond, with 955 namesake stores, saw overall sales fall 49 percent in the operating quarter ended 30 May compared to a year earlier.
The loss came even as online sales in April and May rose 82 percent as people stocked up on cleaning supplies and other staples. But that did not offset the 77-percent crash in in-store sales.
The company’s gross margin narrowed by 8 percent during the quarter due to the costs of fulfilling and shipping the flood of online orders.
As a result of the disappointing numbers, Bed Bath & Beyond will close 200 stores over the next 24 months.
The chain also owns Buybuy Baby, Christmas Tree Shops, and Harmon Face Values.
The closures will net the company between $250 million and $350 million in annual savings after one-time costs of closing stores, said CEO Mark Tritton.
The company was troubled before the economic lockdown. It lost $371 million in 2019’s second quarter. Even though it cut the loss to just over $3 million this year, its stock price has fallen about 40 percent during 2020.
Now that stores are reopening, many are outperforming the company’s expectations, Tritton said. Consumers are moving up from buying water filters and cleaning supplies to bedding and some home décor.
“Home is now everything,” Tritton noted. “It’s the epicenter.”
Brooks Brothers Goes Bust. The 202-year old, high-end men’s clothier that embodied business chic for decades and kept Abraham Lincoln looking sharp, has filed for Chapter 11 bankruptcy.
A rising number of competitors offering styles appealing to younger consumers have been siphoning away the chain’s pool of potential new customers.
Also, the new “casual office” and the longer-term work-from-home trend accelerated by the shutdown has slashed demand for pinstripes and silk ties.
Year-on-year sales of men’s business wear plunged 74 percent between April and June, according to GlobalData Retail.
Brooks Brothers announced in June it would lay off 700 workers and had decided to sell at least 51 of its 500 stores worldwide to make itself more attractive to buyers, especially Authentic Brands, which had expressed interest last year. But the economic shutdown sank the deal.
One of the last menswear companies to make its clothes in the U.S., Brooks Brothers will shut down its three domestic factories on 15 August.
The company has secured $75 million to finance operations during bankruptcy and will find a buyer for itself “within the next few months,” it said.
Walgreens to Cut 4,000 U.K. Jobs. Boots, Walgreen’s chain of British drugstores, will dispense with 4,000 workers, about 7 percent of its labor force, and close 48 in-store Boots optical centers as it seeks to recover from the U.K.’s severe lockdown orders that saw traffic in Boots stores fall by 85 percent in April.
The company also announced a $2-billion “impairment charge” due to its operating loss and “uncertainty” about the possibility of ongoing economic disruption.
The cuts were announced on 9 July, the same day that Burger King’s U.K. division said it may close 10 percent of its restaurants and vaporize 1,600 jobs; and the John Lewis department store chain revealed plans to close eight stores and lay off about 1,300 employees.
Levi Strauss Revenues Crater. The jeans maker took in 62 percent less revenue in the quarter ending 30 May than a year earlier, and the company’s stock price has fallen 34 percent this year.
The quarter encompassed the three months during which the economic shutdown had the worst effects.
However, Levi’s online sales grew from 5 percent to 15 percent during the period.
Many Levi stores have reopened and, of those, 40 percent are reporting sales that exceed the same period in 2019, the company said, although the surge may fade after people replace worn-out jeans.
BMW to Slash 16K Jobs. The German car maker will erase 10,000 contract and temporary jobs and, soon after, 6,000 positions from its core workforce.
In agreement with a major union, the 6,000 jobs will not be framed as layoffs or terminations.
As workers retire or take jobs with other employers, they will not be replaced; open slots will be designed out of the workflow or filled by workers already on the payroll.
The balance of the cuts will be made by three mechanisms.
First, the company will “retire” workers nearing their pension age, giving them a generous severance payment. Second, 40-hour workweeks will be reduced to 38. Also, some employees will be enticed to forego the cash bonus in their labor contract and instead be given eight extra vacation days.
The result will be the cash equivalent of 6,000 jobs being eliminated.
The company has framed the reduction as a response to loss of sales due to the global economic shutdown and the shift to manufacturing more electric vehicles, which requires fewer workers. BMW plans to field 25 electric vehicle models by 2023.
Critics claim the cuts also are a response to shareholders’ demands that dividends not suffer. In mid-May, the company’s stockholders voted themselves €1.6 billion in dividends while 34,000 BMW workers saw their work hours and incomes cut back.
Lipstick Lull: With mask wearing the new ABnormal, lipstick sales will crash by 70 percent this year, predicted Tomas Espinoza, Marketing Chief for Schwan Cosmetics, which formulates make up for Revlon and L’Oreal, among other brands.
A new fad, not a trend as we see it, is rather than putting on lipstick that smears against face masks, women are spending $350 and up to have a color permanently tattooed into their lips.
