America’s make-or-break week

Decisions made in the next few days will shape how coronavirus impacts the economy

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Congress has passed a $2 trillion rescue plan but before those funds start to flow, American companies from the owner of a single liquor store in Boston to corporate giants like Macy’s Inc., must decide what to do about April’s bills: Which obligations do they pay and which can they put off? How many employees can they afford to keep on the payroll? Can they get a break on rent?

The decisions they make this week could shape how deeply the economy is damaged by the coronavirus pandemic.


“Rent is due. Utilities are due. Credit card bills are due April 1,” said Hadley Douglas, who has laid off two workers from her liquor business, The Urban Grape. “The deadline is looming large and it is petrifying.” She said her landlord turned down a request to temporarily pay half the rent but said to keep in touch as it was focusing first on smaller, harder hit businesses.

Millions of Americans are suddenly out of work and many businesses have already closed under orders from state and local governments to close to prevent the spread of the virus. A record 3.28 million Americans filed for unemployment benefits in the week ended March 21.

The U.S. restaurant industry has lost $25 billion in sales since March 1, according to a survey of 5,000 owners by the National Restaurant Association. Nearly 50,000 stores of major U.S. retail chains have closed, according to the companies.

A sign alerts customers that the dining room at The Varsity is closed, Thursday, March 19, 2020, in Atlanta. (AP Photo/John Bazemore)


An estimated $20 billion in monthly retail real estate loans are due as early as this week, according to Marcus & Millichap, a commercial real-estate services and consulting firm. Many retailers and restaurants have said they are not going to pay their April rents, which in turn poses a threat to the $3 trillion commercial mortgage market.

Economic activity in the U.S. and other developed countries could be lowered by a quarter, the Organization for Economic Cooperation and Development said Friday.

Companies of all sizes are feeling the squeeze, especially retailers and restaurants that have closed their doors during the outbreak. Nike Inc. is asking to pay half its rents. TJ Maxx is delaying payments to its suppliers. Victoria’s Secret and Men’s Wearhouse have furloughed thousands of workers. Cheesecake Factory Inc. closed 27 of the company’s locations and furloughed 41,000 hourly workers, nearly 90% of its total staff.


‘Stress and strain’

Tyson Evans, a 23-year-old line cook for Cheesecake Factory in Indianapolis, Indiana, said he and fellow workers were stunned to learn about the furloughs. He said they believed the company would continue to employ them despite a drop in business. He is now filing for unemployment.

“We keep this company going,” said Mr. Evans, who is currently living with his parents and worried about paying bills including his phone, grocery and prescriptions. He has started an online petition to urge the chain to keep paying furloughed workers.

An editorial stock photo of The Cheesecake Factory restaurant in Las Vegas, NV.

Denise Burger, a 64-year-old Cheesecake Factory server in Escondido, Calif., said she was counting on the 36 hours of work the company had scheduled for her before the furloughs came down. Ms. Burger said she’s been contacting her mortgage and credit card companies to try and postpone payments.

“This pandemic has put much stress and strain on me,” said Ms. Burger, who is single and has worked for the company for six years in a job she loved.

California-based Cheesecake Factory said it would continue to provide health insurance for employees until June 1, and provide them a daily meal from their restaurants that remain open for take-out orders.

Cheesecake Factory has notified landlords that it won’t pay April rent. “Due to these extraordinary events, I am asking for your patience and, frankly, your help,” wrote Chief Executive David Overton.

Owners of independent and small restaurant chains have also asked their landlords for rent relief, with mixed responses. Some say landlords are offering them deferments of several months, whereas others haven’t gotten much help yet.

“Landlords, if they are overly greedy, they could be losing us,” said Andy Howard, chief executive of Huey Magoo’s Restaurants, who is pleading for a break on rents for his Orlando, Fla., chicken tenders chain.

Residential and commercial landlords say they have been flooded with requests from individuals and businesses saying they will struggle to pay their rent for April and beyond.

“I feel like I’m running triage in a retail hospital out of my apartment," said Ami Ziff, director of national retail for Time Equities Inc., which owns 122 retail centers, including shopping centers, malls and street-front retail locations in 25 states.

April 1

Mortgage firms are bracing for a wave of missed payments starting April 1 as borrowers lose their jobs. Fannie Mae and Freddie Mac say they will offer deferrals on home mortgages and postpone foreclosures. Auto dealers say consumers are calling to put off their April lease or loan payments.

Guy Hillel, 47 years old, got laid off from his job as a food and beverage manager at a Times Square hotel earlier this month after the property closed due to the outbreak. He is eligible for $504 a week in unemployment benefits, a fraction of what he was earning.

Mr. Hillel, who has a wife and two children, says it isn’t enough to cover the family’s expenses. He has called credit-card companies to negotiate payment extensions, and tried unsuccessfully to delay his monthly car loan for his family’s Volkswagen Tiguan sport-utility vehicle.

“It’s extremely stressful,” Mr. Hillel said. “It’s crazy: I’m more exhausted now than I was before when I had a job.”


Mr. Hillel estimates his family will receive some stimulus money, but not the full amount awarded to couples. The federal economic stimulus program passed last week will provide direct payments to Americans as well as loans to large and small companies. The bill includes $350 billion to help small businesses keep people on their payrolls.

For employees, it increases current unemployment benefits by $600 a week for four months. It also provides one-time checks of $1,200 to Americans with adjusted gross income up to $75,000 for individuals and $150,000 for married couples; individuals and couples are eligible for an additional $500 per child.

Treasury Secretary Steven Mnuchin said the Trump administration aims to send out direct payments to individuals in three weeks and that banks should be able to originate same-day loans for small businesses in as little as a week.

Many business owners and individuals said they have little in the way of cash reserves or savings for bills that come due in the next few days. Some wonder whether the aid will be enough.

The Small Business Administration said the stimulus bill provides “small businesses with the resources they need to get them through this unprecedented time.”

America’s large, marquee retailers are also struggling.

Macy’s Chief Executive Jeff Gennette told suppliers last week that while he had hoped to reopen stores by April 1, that was highly unlikely. “While our digital business and call centers remain open, we have lost the majority of our sales,” Mr. Gennette wrote in a letter reviewed by The Wall Street Journal.

Macy’s has suspended its dividend and drawn down its credit line to bolster its cash. It has reduced pay for executives. It’s also canceling some orders and has doubled the amount of time it gives itself to pay suppliers, to 120 days. Nevertheless, Mr. Gennette wrote in the letter, the retailer may need to begin furloughing some of its 130,000 employees.


Nike has offered to pay 50% rent on its 384 closed U.S. stores, landlords say, and when the stores reopen, a percentage of sales in lieu of any rent for 12 months. Nike executives said they will continue to pay workers while the stores are shut.

“We are currently honoring all existing contracts with our landlords. In collaboration with our real estate partners, we provided a proposal looking at near and long term approaches that we believe will help ensure both parties remain viable business partners through this unprecedented time," a Nike spokeswoman said.

In this Thursday, Aug. 25, 2016, file photo, Nike products appear on display at the SIX:02 shop inside Foot Locker's redesigned Manhattan flagship store in New York. (AP Photo/Mary Altaffer, File)

Tapestry Inc., the parent of Coach and Kate Spade, extended U.S. and European store closures through April 10, but is continuing to pay store workers. “What will be important as we come out the other end is to have a committed team of people,” said Chief Executive Jide Zeitlin.

Mr. Zeitlin said the company is in negotiations with landlords about rent forgiveness and is looking at other expenses to cut aside from labor.

T.J. Maxx and Ross Stores Inc. have canceled orders through mid-June and are delaying payments to suppliers, according to people familiar with the situation. A T.J. Maxx spokeswoman declined to comment. A spokeswoman for Ross Stores didn’t respond to a request for comment.

Financial pressures are particularly intense for small business owners. In a typical community, about half of small businesses had less than two weeks of cash liquidity, according to a 2019 report by the JPMorgan Chase Institute.

Survival mode

Pennsylvania deemed auto repair an essential business, which allowed Tom Bemiller, the chief executive of The Aureus Group, to keep open his three repair shops in the Philadelphia area. Revenue is down 35% this month, he said.

“Customer after customer is telling us I am not going to get my car fixed until this blows over,” said Mr. Bemiller.

Mr. Bemiller said his priority is to pay his 25 employees and his suppliers. His bank is working to determine whether it can retool the terms of his company’s $450,000 loan to allow for interest-only payments and has increased its credit line by $50,000, enough to cover two weeks of payroll. Pennsylvania is letting him delay certain sales tax payments; American Express Co. has agreed to waive fees and interest if he delays his $270,000 corporate credit card bill for one month.

“Right now everything is on the table because we are in survival mode,” Mr. Bemiller said. “We are reaching out to all vendors and creditors and asking for help and trying to delay payments as much as possible.”

Mechanic Andy Beach (R) removes tires on a Chevrolet vehicle at Courtesy Chevrolet dealership in Phoenix, Arizona, January 4, 2011. (Reuters/Joshua Lott)

Mr. Bemiller has reduced his own salary. He hopes to defer payments on his mortgage, student loans, credit card bills and other expenses, but hasn’t had time to work on that yet because he’s been singularly focused on the business, which provides all of his family’s income.

Skipping rent

At Envision Travel Holdings Inc., a travel agency with 11 offices, revenue has fallen by two-thirds in the past month and is expected to drop to near zero in the next month or so. The Las Vegas company, which normally has 40 employees and 25 independent contractors, has laid off four workers and cut hours by 20%.

All but one of Envision’s landlords has agreed to reduce rents, cutting payments to about $15,000 from $38,000, with missed payments tacked on to the end of the lease. The travel company put a hold on its 401(k) retirement savings plan and, for now, dropped its 50% contribution to the employee dental plan. “We are analyzing every expense, line by line,” owner Thomas Carlsen said.

“The universal advice we are giving tenants is don’t pay your rent and see what happens,” said Derek Wolman, partner at law firm Davidoff Hutcher & Citron LLP, which often represents bars, restaurants and hotels in lease negotiations. He said this is especially true in New York state, where there is pending legislation that would give 90 days of rent forgiveness to residential and commercial tenants who suffered financially as a result of Covid-19.

In Detroit, Bedrock, a developer and property owner created by billionaire Dan Gilbert, is offering free rent to more than 100 small businesses and restaurants from April to June. “Hopefully, they sense we’re in it to help them,” said Matt Cullen, chief executive of Bedrock. On Monday, Last week, Michigan ordered all non-essential businesses to close.

Smaller landlords who don’t have enough reserves to tide them through a prolonged pause in rent collection say they are in a precarious state.

“Why is the landlord the first line in bailing them out?,” said Corey Bialow, a small property owner. He owns a stake in 12 properties in different states including New Jersey and Massachusetts.

He said he will be on the hook for additional costs beyond mortgages such as real estate taxes, maintenance and insurance and will have to dip into his savings to pay for these. “I’m personally on the hook.”


Coyote Hole Ciderworks, a three-year-old cider producer in Lake Anna, Va., saw an 80% drop in revenue after it was forced to shutter most of its operations.

Coyote typically employs seven workers most of the year and fifteen or more in the summer. Now, just co-owner Laura Denkers and one employee remain on the payroll; Her husband, Chris, has stopped taking a salary so the company can continue paying health insurance premiums. The Denkers’ 10-year-old twin sons have cystic fibrosis, which makes keeping health coverage crucial.

The couple began applying for a $60,000 disaster loan from the SBA on March 20. They said all the information they put into the system was lost when the SBA revamped the disaster loan application process because of technical difficulties.

Peck's Food owner Theodore Peck stands on the sidewalk outside his business while closing his storefront coffee shop and bakery due to the coronavirus outbreak, Wednesday, March 18, 2020, in the Clinton Hill neighborhood of the Brooklyn borough of Ne

The small company has secured a 90-day reprieve on mortgage payments from its bank; Mr. Denkers plans to pay the minimum allowed on his corporate credit card and is trying to defer payments on equipment loans and other bills. “The next three weeks is the real crunch time when we need an influx of money,” he said.

Jodi Rodriguez, until recently director of retail and sales for Ovenly, a New York City-based wholesale and retail bakery that laid off all of its 72 employees, filed for unemployment March 18.

She wrote a letter to the landlord of the building she’s lived in for eleven years, asking for a temporary discount on the rent on her New York apartment. Ms. Rodriguez owns a rental property in Florida, but the tenant is a make-up artist who isn’t currently working. “I’m unsure whether she is going to pay or not,” Ms. Rodriguez.

“The hardest part right now is health insurance,” said Ms. Rodriguez, noting that coverage through Ovenly ends March 31.

Even businesses that have had gains are facing uncertainty. Ms. Douglas, the Boston liquor store owner, said in-store sales are up 130% over what she had budgeted, more than offsetting the collapse of her catering and event business. She’s keeping a close eye on cash flow and expenses, worried that she, her husband or one of their employees might get sick, that worker illnesses could disrupt her supply chain or that the state could order liquor stores to close.

Ms. Douglas is a member of a local business group in Boston’s South End neighborhood that recently surveyed more than 100 small firms. Most of the owners reported revenue is down by 90% or more in March, with monthly losses totaling about $8.5 million for the 72 businesses that provided specific figures.

“Every order we put in is nerve-wracking because we are so worried about getting stuck with product we can’t sell,” she added. “We are open today but that doesn’t mean we will be open next week.”

—Peter Grant and Chip Cutter contributed to this article.