Nordstrom Notifies Landlords That It Will Pay Only Half of Its Rent for the Year
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Nordstrom is the latest retail tenant to find itself at odds with its landlords.
The department store has reportedly notified the property owners of its namesake and off-price Rack outposts that it will pay only half of its rent costs for the rest of 2020.
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According to Retail Dive, a letter from president of stores Jamie Nordstrom to landlords on Friday showed that the company would use comps as the basis for its decision to make its occupancy payments. The report suggested that Nordstrom would pay “up to a full reconciliation should 2020 sales reach 90% of sales made in that location in 2019.”
In addition, the retailer reportedly said that it would “continue to maintain insurance coverage, pay utilities on which we are the account holder and maintain your building(s) as required by the lease.”
FN has reached out to Nordstrom for comment.
The report came a day after the Seattle-based company confirmed that it was making steep cuts to its workforce as it continues to grapple with the coronavirus outbreak’s outsized impact on its business. A spokesperson wrote to FN that Nordstrom was “making adjustments” in response to shifting consumer behaviors but did not specify the number of roles that would be affected. (A Seattle Times article indicated that the chain had cut 6,000 jobs across the country last month.)
“We’re realigning and reducing our workforce to support our market strategy, including in our corporate support teams,” the spokesperson shared. “These types of decisions are never easy because we realize the impact it has on our people. We’re committed to taking care of them as best we can during this transition.”
Nordstrom has recently taken several steps to preserve liquidity and reduce expenses. It has drawn down its $800 million revolver, as well as announced plans to permanently shutter 16 of its full-time stores and three Jeffrey boutiques. It has also reduced the salaries of its top executives, while CEO Erik Nordstrom, president Pete Nordstrom and the board of directors are forgoing their pay for a portion of the year.
The chain’s first-quarter report in late May showed a net loss of $521 million, or a loss of $3.33 per share, compared with analysts’ expectations of a loss of 95 cents per share. Revenues for the three months ended May 2 fell to $2.12 billion from last year’s $3.44 billion, while market watchers anticipated sales of $2.41 billion. It attributed the declines to the COVID-19 health crisis, which forced the temporary closures of its locations for weeks.
Nordstrom isn’t the only retailer to skip out on its lease obligations as the pandemic throws its balance sheet into disarray: Urban Outfitters, H&M and Burlington have announced that they would not pay rent, while Gap and Ross have been involved in recent litigations filed by their commercial landlords, who are also struggling to meet their own mortgage terms.
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