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Companies from major retailers and package carriers to local restaurants and hair salons are awakening to a new economic reality in the age of the new coronavirus: Being open for business is almost as hard as being closed, the Wall Street Journal reported. Facing higher costs to keep workers and customers safe and an indefinite period of suppressed demand, businesses are navigating an ever-narrower path to profitability. To make the math work, some businesses are cutting services and jobs. Others are raising prices, including imposing coronavirus-related fees aimed at getting customers to share some of the expenses. Walmart Inc., Target Corp. and Home Depot Inc. this week said they absorbed more than $2 billion combined in added expenses for wages, bonuses and other benefits for workers during the early months of the pandemic. McDonald’s Corp. laid out conditions for franchisees to reopen their dining rooms that include cleaning bathrooms every half-hour and digital kiosks after every order. Ford Motor Co. this week opened its American assembly plants for the first time in two months, and promptly had to idle factories in Michigan and Illinois after employees tested positive for Covid-19. The stakes can be higher for small businesses, which tend to operate on thinner profit margins and smaller cash reserves. As they begin to reopen after weeks of being shut down, they are confronting a cost-revenue ratio that is increasingly out of whack. Prices of food and other items have risen. Employees need protective equipment at work. Rising unemployment, safety concerns and limits on the number of customers a business is allowed to serve are setting a cap on sales. Some have tried to raise prices to bridge the divide, but greeting consumers who have been staying at home with higher costs is a delicate proposition.

National restaurant chains and other stable businesses are prodding their landlords for rent relief as the economic picture sours, setting the stage for court battles and protracted clashes between big tenants and property owners, the Wall Street Journal reported. A number of blue-chip companies that made rent payments the past two months have indicated they reached their limit with June. Chipotle Mexican Grill Inc. and Shake Shack Inc. said they are lobbying property owners to renegotiate the leases or offer deferred rent payments. Starbucks Corp. sent a letter to landlords asking for a range of concessions, including changes to lease terms and base rent for at least 12 months, starting next month. Restaurant and cafe operators are starting to reopen outlets again as more states like Florida, Texas and South Carolina begin to relax lockdown orders. But many of these companies say that social-distancing guidelines restrict them to only about a quarter to half of their normal capacity, forcing them to modify operations and cut expenses to stay in business. Rents usually account for around 8 percent of sales at restaurants. Now, with the pandemic causing restaurants to shut outlets or cut capacity, it can represent as much as 20 percent of sales, according to Jeffrey McNeal, president of Fessel International, a restaurant and hospitality consulting firm. That has many firms leaning on their landlords for help with another rent payment due in less than two weeks, and mounting evidence that the U.S. economy could be under pressure for an extended period. The Congressional Budget Office said yesterday that an economic recovery would drag on through the end of next year, and that gross domestic product will likely be 5.6 percent smaller in the fourth quarter of 2020 than a year earlier.

Home decor and furniture retailer Pier 1 Imports Inc. said on today it has filed to seek bankruptcy court approval to wind down its operations as the impact of the COVID-19 pandemic hampered the ability for it to find a buyer, Reuters reported. Pier 1, which operates about 541 stores in the U.S., said in a statement that it intends to sell its inventory and remaining assets, including its intellectual property and e-commerce business, through a court-supervised process. “Unfortunately, the challenging retail environment has been significantly compounded by the profound impact of COVID-19, hindering our ability to secure such a buyer and requiring us to wind down,” Chief Executive Officer Robert Riesbeck said. Pier 1 said it will continue to serve its customers through its online operations, Pier1.com, and will start closing stores and begin sales liquidation once stores can reopen based on COVID-19 guidelines from local government officials. The company’s debtor-in-possession financiers have agreed to allow the company to overdraw about $40 million to support operations through the wind-down period, it added. The Fort Worth, Texas-based company had earlier in the year in February filed for chapter 11 protection and was pursuing a sale, a month after announcing plans for up to 450 store closures and the shutdown of two distribution centers.

Centric Brands Inc., which designs and sells clothing under licensed brands including Calvin Klein, Tommy Hilfiger and Nautica, was forced into bankruptcy by COVID-19 yesterday, MarketWatch.com reported. The company said that it has agreed to voluntarily file for chapter 11 bankruptcy with $435 million in debtor-in-possession financing from funds managed by Blackstone, Ares and HPS Investment Partners. "The agreement contemplates a timely emergence from the process with a plan to substantially reduce the Company's funded second lien indebtedness by approximately $700 million, thereby positioning the business for future growth and success," the New York-based company said in a statement. Chief Executive Jason Rabin said that the coronavirus pandemic has "significantly" impacted companies across all sectors, disrupting its wholesale accounts' ordering and constraining cash flow. The company expects to emerge from bankruptcy as a private company. Blackstone will exchange second lien debt for equity in the new entity. Existing senior lenders Ares and HPS will retain their senior loan positions and also receive equity. 

J.C. Penney Co Inc plans to trim its store count by 29 percent to about 604, as the U.S. department store chain looks to focus on those more profitable, a regulatory filing showed yesterday, two days after it filed for bankruptcy protection, Reuters reported. The stores to stay open accounted for 82 percent of the company’s fiscal 2019 sales, J.C. Penney said. Reuters on Friday reported that the company was planning to shutter roughly 200 stores. J.C. Penney, which is looking to cut costs to remain afloat, plans to reorganize and emerge from bankruptcy proceedings after eliminating several billion dollars of debt. It will also explore a sale as part of the terms of its $900 million of debtor-in-possession financing.

Guitar Center Inc. sold new bonds to help pay for some of its old debt as it fights to stay afloat during the pandemic with its stores shut, Bloomberg News reported. The largest U.S. retailer of musical instruments and equipment sold about $32.5 million of new senior secured notes with a 10 percent coupon due 2022 to holders of its existing first-lien notes, according to people with knowledge of the arrangement. The company used the proceeds to pay the coupon on its existing first-lien notes due 2021. Guitar Center has fulfilled debt payments it skipped last month, ensuring it will stave off a default, Bloomberg reported. As part of the transaction, it exchanged $7 million of remaining senior unsecured notes due 2020 for about $5 million of previous first-lien notes.

J.C. Penney Co. Inc. filed for bankruptcy protection on Friday, the latest among traditional brick-and-mortar retailers to crumble as prolonged store closures due to the COVID-19 pandemic deliver the final blow to troubled businesses, Reuters reported. The U.S. department store chain, known for selling family apparel, cosmetics and jewelry at roughly 850 locations, said it reached an agreement with creditors for about $900 million of fresh financing to aid operations, while it navigates bankruptcy proceedings. The company filed for chapter 11 protection at the U.S. Bankruptcy Court for the Southern District of Texas. The bankruptcy filing caps a long decline for the 118-year-old department store chain, which once operated more than 1,600 locations that became fixtures in U.S. malls. The company at one point employed nearly 200,000 people. Even before the coronavirus outbreak, J.C. Penney was struggling with nearly $4 billion of debt and pressure from both discount retailers and e-commerce companies. Read more. 

In related news, J.C. Penney Co.’s plan to slash billions of dollars in debt and emerge from bankruptcy court includes a proposal to create two new publicly traded entities, including a real estate investment trust that would hold some of the retailer’s property, Bloomberg News reported. The company’s tentative bankruptcy plan calls for creating both a new operating company and a REIT that would collect rent from a subset of J.C. Penney stores, court papers show. J.C. Penney can, with its first-lien lenders’ permission, sell up to a 35 percent stake in the new REIT to generate cash. The retailer would seek to list shares of the new operating company and the REIT on a national securities exchange “as soon as reasonably practicable” after its proposed plan takes effect, according to court documents. J.C. Penney would also try to sell its distribution centers under the plan. The proposal is “predicated on speed — it is not an option to languish in chapter 11,” Chief Financial Officer Bill Wafford said in a court declaration, adding that the retailer needs to complete a restructuring deal before the holiday shopping season. “Failure in these efforts is not an option, with nearly 85,000 associates depending on the right outcome here.” But the REIT arrangement could be abandoned. If J.C. Penney and its first-lien lenders don’t agree on a new business plan by July 14, or if the requisite funding isn’t obtained by Aug. 15, the company would instead sell all its assets unless the lenders say otherwise. Read more. 

J.C. Penney also said that it received bankruptcy court approvals for motions to support its business operations, including approval for the retailer to access and use its approximately $500 million in cash collateral, Bloomberg News reported. The U.S. Bankruptcy Court for the Southern District of Texas also authorized the company to continue paying non-furloughed employees’ wages, to provide certain benefits to all employees and to pay vendors for goods and services provided after the chapter 11 bankruptcy filing on Friday. Read more. 

The White House has threatened to veto a $3 trillion coronavirus relief bill that House Democrats hope to bring up for a vote on Friday, UPI.com reported. Known as the HEROES Act, the legislation Democrats unveiled on Tuesday aims to funnel money to state and local governments to address issues that were not included in previous measures and increase funding for the U.S. Postal Service. Since it was announced, Republicans have balked at the package, deriding it as a partisan move filled with expenses unrelated to the coronavirus pandemic, a notion the White House repeated Thursday in its letter to the House of Representatives. "This proposed legislation, however, is more concerned with delivering on longstanding partisan and ideological wishlists than with enhancing the ability of our nation to deal with the public health and economic challenges we face," the Trump administration said. "If H.R. 6800 were presented to the president, his advisors would recommend that he veto the bill." In late March, President Donald Trump signed a more than $2 trillion COVID-19 bailout package, and Senate majority leader Mitch McConnell, R-Ky., said instead of working on a new bill focus should now be on maximizing the effects of the first package. "We now have a debt the size of our economy," McConnell said. "So I've said, and the president has said as well, that we have to take a pause here and take a look at what we've done."