In the midst of the COVID-19 outbreak, as retailers close their doors to slow the spread of the novel coronavirus, making rent is becoming an issue.
Last week, The Cheesecake Factory pled for "help" and "understanding" from landlords, saying that without revenue coming in, it couldn't pay its rent. Mall owner Taubman Centers (NYSE:TCO) is preemptively telling its lessees that, coronavirus or no coronavirus, they must "meet their lease obligations." Now, one retail chain is coming out and saying it: They won't pay rent, period. Not for the time, being, at least.
Leading this retailer rebellion today is Urban Outfitters (NASDAQ:URBN), which in a press release Tuesday announced a series of "measures to protect our financial position and increase financial flexibility during this challenging time period."
For one thing, Urban is "furloughing a substantial number of store, wholesale and home office employees for 60 days beginning tomorrow, April 1." It's also suspending hiring and eliminating bonuses for this fiscal year, borrowing $220 million to keep itself solvent, reducing capital expenditures, and reducing all "non-payroll expenses, including creative, marketing, and travel."
Oh, and Urban Outfitters is also going to "suspend the payment of rent temporarily and delay or cancel some planned new store openings."
That last point, although buried in the middle of the press release, may be the most significant for retail investors. Instead of negotiating with lessors for rent relief, Urban Outfitters is stating flat-out that it will not pay rent. If lessors like Taubman, which is the landlord for some Urban Outfitters Properties, don't like it, they'll probably have to fight it out in court.
Good luck getting a court date in the middle of a pandemic, though.