The retail industry as a whole is struggling with the economic slowdown caused by the SARS-CoV-2 coronavirus outbreak. A bellwether company in the luxury segment, Tapestry (NYSE:TPR), on Monday announced a series of business retrenchment measures it is taking to endure this period.
The company said it will cut roughly 2,100 part-time retail employees, effective Saturday, April 25. These workers will be given a one-time payout of $1,000 "to reduce the financial burden of this action." Until May 30, Tapestry will retain most of its North America retail workforce; afterward it will furlough the majority of store managers and sales associates in outlets that have not reopened.
Remaining employees above a certain salary level are to take pay cuts ranging from 5% to 20%, depending on the current size of their paycheck. The company didn't provide any further details. Also, members of the board of directors will all take a 50% reduction in their compensation. CEO Jide Zeitlin's salary will be cut by 50%. All bonuses are canceled for the rest of the year, as are merit salary increases for fiscal 2021.
Tapestry aims to reopen stores in China -- which was a thriving market for the company's Coach handbag line -- as soon as possible, in accordance with official health guidelines. It's also delaying or even canceling new store openings, and shifting its retail emphasis to online sales.
Finally, it is suspending its quarterly dividend payments and its share repurchase program, and drawing down $700 million of its $900 million revolving credit facility.
This seems to be sounding alarm bells with investors. Tapestry's stock dived 6.6% on Monday, a steeper decline than that recorded by peer consumer goods stocks and the wider equities market.