SEATTLE–(BUSINESS WIRE)–Mar. 23, 2020: Nordstrom Inc. said it was suspending its dividend, drawing down $800 million from a loan facility and suspending its share buyback program in response to the “rapidly changing market uncertainty” from the COVID-19 pandemic.
The coronavirus continues to hit retail hard. Nordstrom is extending store closures in the U.S. and Canada until April 5. After that, the Seattle-based retailer will furlough a portion of corporate employees for six weeks.
“During this time of great uncertainty, we’re making decisions to best position Nordstrom for our employees, customers and shareholders,” said Erik Nordstrom, chief executive officer, Nordstrom, Inc. “We are proactively taking steps to strengthen our financial flexibility to help us navigate through this unprecedented situation.”
Nordstrom exited fiscal 2019 with a healthy balance sheet, including $853 million of cash. With more than 100 years of experience managing through multiple business cycles, Nordstrom is taking the following actions out of an abundance of caution to increase its cash position and preserve financial flexibility:
- suspending its quarterly cash dividend beginning in the second quarter of fiscal 2020. The Company remains committed to paying dividends over the long-term and will seek to resume payment when appropriate;
- drawing down $800 million on its revolving line of credit in addition to its initial savings plan of $200 million to $250 million in fiscal 2020;
- targeting further reductions of more than $500 million in operating expenses, capital expenditures and working capital, this includes ongoing efforts to realign inventory to sales trends; and
- suspending share repurchases
In addition to these actions, the company continues to actively pursue further options to increase financial flexibility. While there is no immediate need to raise capital at the present time, the company intends to evaluate accessing the financing markets and will look to raise capital, when and if the company deems it prudent, to further strengthen its balance sheet.
On March 16, the company announced the temporary closures of its stores, including Nordstrom full-line and Nordstrom Rack, to do its part in slowing down the spread of COVID-19. Nordstrom continues to serve customers through its online business, which represented one-third of fiscal 2019 sales. Through ongoing actions to stimulate customer demand and clear excess inventory, sales from its online business are helping to partially mitigate the impact from store closures.
The company has been paying store employees during the shutdown and will continue to provide pay and benefits through April 5.
Erik and Pete Nordstrom will decline their own salaries from April to September, and the executive leadership group will forgo a part of their salaries as well. In addition, all members of the company’s board will not take cash compensation for a six-month period.