Apparel store sales were the worst on record in April when Signet Jewelers, a billion-dollar jewelry chain, and ANTHOM, a modest boutique in New York City, made last-ditch shifts to e-commerce. But only one is turning the lights back on.  

It’s far from the classic winners and losers story. In the jewelry and clothing business, there are few victory laps to take in the middle of a pandemic when no one needs a diamond necklace or an Easter dress. 

As states across the U.S. lift stay-at-home orders and allow nonessential businesses to reconvene, some apparel stores will reopen – others won’t. The post-lockdown landscape underscores the growing chasm between the retail haves and the have-nots at a time when few people are shopping for clothes. 

 “It’s a troubling landscape across the board,” said Scott Hoyt, head of consumer economic research at Moody’s Analytics. “But big retailers with financial wherewithal can navigate many issues more easily than the mom and pop store that’s on a shoestring.”

On a local level, neighborhood boutiques may have little competition. But online, they’re up against heavyweights that have perfected the delivery of cheap goods. The layout of larger stores is more conducive to social distancing. And rent typically eats up a larger share of sales for small apparel shops.

In March, ANTHOM entered what its owners thought would be its most profitable season. Instead, the women’s apparel store made nearly nothing, and the brick and mortar location won’t reopen. 

After operating for 6 years, the storefront now sits idle in Soho, New York, a shopping enclave lined with high-end boutiques, legacy design houses and fast-fashion brands like Zara and H&M. With New York being the epicenter of the pandemic in the U.S., the boutique’s owners don’t expect foot traffic to return to normal levels for months – if ever.

“The pandemic is the nail in the coffin,” said Marshall Johnson, CEO at ANTHOM. “We don’t really see a logical way to survive.”

The more retailers that don’t make it to the other side, the deeper the scars left on the economy and the slower the recovery will be if, and when, the pandemic ends. 

Mass store closures and widespread bankruptcies slow rehiring. Less spending at stores leads to smaller income tax budgets for cities and states. Deep discounts at liquidating stores restimulate the cycle, leading to fewer short-term purchases at retailers struggling to stay afloat.

“The more unemployed people we have, the more things shut down, the longer it will take to get it back up and going,” said Michael Noel, associate professor of economics at Texas Tech University. 

Clothing stores have already taken an unprecedented hit. 

Overall retail sales fell 16.4% in April, the steepest monthly drop the country has ever seen as Americans pulled back in almost every category except groceries. Apparel spending was virtually eviscerated, slumping 89%. Most stores won’t get those sales back as consumers shift into a new season with no need to buy clothes for proms, graduation ceremonies, Easter Sunday or Mother’s Day. 

Signet Jewelers cushioned the blow by tapping $900 million from its credit facility and focusing primarily on online sales ahead of one its most revenue-generating holidays.

“When Mother’s Day was on the horizon, we needed to be able to connect with our customers,” said Bill Luth, Signet’s executive vice president of store operations. 

All 2,900 of its U.S. locations including Kay Jewelers, Zales and Jared stores were off-limits to customers halfway through March and throughout most of April. Hundreds of stores across several states reopened by mid-May and staff in select markets were retrained to assist customers virtually.  

Signet had  $1.2 billion in cash when the pandemic struck. The company’s ability to reduce salaries, slash marketing budgets and launch new digital services helped it weather the storm. 

ANTHOM also started selling online, but mostly to get rid of existing inventory. 

The boutique was at a standstill for a month with no cash to pay workers until it received a forgivable loan from the government through the Paycheck Protection Program that Congress established as part of its response to the pandemic. The shop temporarily rehired sales staff and shifted customer service roles online. But with 90% of its typical revenue gone, it can’t cover the rent. 

“It was hard to know what business was going to look like in the next two years before this happened,” Johnson said. “So this just really sped things up, hyperspeed.”

For the retail sector as a whole, it’s unclear whether the future looks more like Signet’s pivot or more like ANTHOM’s pitfall.  

However, it’s clear that many clothing stores were floundering well before the coronavirus made matters worse. 

In February, when shopping conditions were fairly normal in the U.S., apparel store sales rose a meager 0.3%. Since then, notable non-essential brands filed Chapter 11 bankruptcy to shed debt and other liabilities, but have plans and resources to resume business. 

Neiman Marcus filed on May 7 and has launched curbside pickup at some locations. JCPenney filed on May 15 and has moved to reopen a fraction of its stores. Pier 1 Imports is reopening stores just to sell off inventory before closing shop for good. It’s unlikely that online retail can sustain overall consumer spending which makes up a third of all economic activity. But scale plus a viable online business is key for the retailers weathering the storm more easily. 

Signet was coming off its strongest holiday sales in four years, boosted by its existing online selling platform. The company added curbside pickup and virtual consultations during the lockdown. Other retailers cushioned by e-commerce-related sales include essential stores like Walmart and Target, which remained open and benefited from stimulus check spending. 

Still, economists project other specialty and department store casualties in the coming weeks as stores with weak balance sheets and puny online sales crater under the pandemic. 

“There’s going to be an absolute avalanche of bankruptcies,” said Mark Cohen, director of retail studies at Columbia and a former Sears executive. “And there’s no easy or simple way out.”

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