case study2

2/8/22, 3:10 PM Global Pandemic Forces Temporary Closure of Many Retail Stores Across the World

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GLOBAL PANDEMIC FORCES TEMPORARY CLOSURE OF MANY RETAIL STORES ACROSS THE WORLD

An outbreak of the COVID-19 disease, also known as the coronavirus, began in

China in December 2019, spread to other countries in the first several months of

2020, and was declared a global pandemic by the World Health Organization in March 2020. Mounting concerns about the potential for the coronavirus to infect a

large percentage of the population and overwhelm local hospitals and health

professionals, prompted government officials in many countries during February- April 2020 to issue “stay-at-home” orders to the general public, urge companies to

allow employees to work from home where feasible, and mandate the closure of

retail stores and all “non-essential” local businesses until the daily/weekly number of people in their locales being newly diagnosed with COVID-19 began to flatten

out or subside. People were urged to practice “social distancing” and wear face

masks when grocery-shopping, picking up to “to-go orders” from local food establishments, or otherwise venturing out beyond the confines of their homes to

2/8/22, 3:10 PM Global Pandemic Forces Temporary Closure of Many Retail Stores Across the World

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run errands. However, by the end of May 2020, widespread concerns about the

long-term economic damage the business shutdowns were causing and signs that the spread of the virus was being contained in a growing number of locations

prompted government officials to begin reopening their local economies. A growing

percentage of retail stores had re-opened or partially re-opened in much of Asia, and limited re-openings were occurring in Europe and North America.

The global pandemic had a devastating impact on most apparel retailers. In North

America, luxury retailer Neiman Marcus, apparel retailer J Crew, and department

store retailer J.C. Penney filed for bankruptcy in May 2020. Nordstrom announced on May 5, 2020, that it would soon permanently close 16 department store

locations. The Gap, Inc. was also struggling in the new environment; the price of

the company’s stock had plummeted since January 2020, and most of its stores in the United States remained closed as of late May 2020. Back in February 2019,

The Gap announced it would close some 230 of its stores over the next two years.

L Brands announced it would not be making rent payments while its Victoria’s Secret and Bath and Body Works stores were closed. Many other retail and

restaurant chains, also running short on cash, told landlords that they would be

unable to make their rent payments until their stores and their cash flows improved. Headed into June 2020, most all chain retailers and millions of local businesses in

North America, Europe, and elsewhere were wrestling with the uncertainty created

by the global pandemic, store closures, how long it would take for customer traffic

to return to former levels, and the extent to which consumer buying and shopping patterns would be affected both in the short term and the long term.

Retailers with robust e-commerce sales were better able to weather the global

pandemic crisis. Nike, the global sports apparel leader, had a strong digital

presence and was expected to experience only a modest and fairly short-lived downturn in apparel revenues. forecast to weather the storm. Further, with the re-

opening of the company’s Nike stores in China in May 2020, the company saw

signs of sales improvement in Asia, pointing the way to a possible strong recovery in Europe and North America. The adidas Group, number two globally and15

2/8/22, 3:10 PM Global Pandemic Forces Temporary Closure of Many Retail Stores Across the World

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financially strong, was also expected to come through the pandemic in a

competitively strong position. Under Armour’s situation, already weakened by sales troubles in North America, was made worse by the pandemic. Many investors and

industry analysts believed the near-term hit to the company’s sales could be as

much as 30 percent in 2020. As of May 2020, the company had announced layoffs, pay cuts for remaining employees, and the postponement of plans for an Under

Armour flagship store in New York City.16