As the coronavirus pandemic continues, chief financial officers are expecting to have to make cuts to preserve cash flow — and they’re forecasting more furloughs and layoffs ahead.
On April 6, 7 and 8, PwC surveyed more than 300 CFOs in the United States. The result: Over the next month, more than a quarter of finance leaders surveyed (26%) expect their companies will have to make layoffs, and more than two-fifths of respondents (41%) expect to furlough a portion of their workforce.
This “marks a significant change,” according to PwC, since two weeks ago, only 16% of CFOs expected layoffs, which are “typically considered a means of last resort.”
As coronavirus store closures continue with no certain end date in sight, major footwear players such as Dick’s Sporting Goods, Macy’s and Nordstrom have decided to furlough store workers, and executives are taking pay cuts or forgoing salaries during this period. Many companies have also tapped into credit lines as they seek to maintain financial flexibility while doors are shut.
According to PwC, the top coronavirus-related concern for 75% of financial chiefs is “effects on results of operations, future periods, and liquidity and capital resources.” Two-thirds of CFOs are considering deferring or canceling planned investments to keep cash flowing. More than four-fifths (82%) of those cutting costs are slashing expenses in “facilities and general capital expenditures,” and two-thirds are whittling the cost of their workforces.
The majority of CFOs surveyed (81%) are expecting to see declines in revenues, profits or both this year because of the coronavirus crisis. But consumer-facing companies, such as fashion and footwear retailers, have been among the hardest hit, according to PwC, as stay-at-home orders have forced brick-and-mortar closures and economic uncertainty has curbed discretionary spending. Half of consumer markets CFOs expressed concern about decreased consumer confidence leading to lower spending, versus 39% overall. A third of consumer markets CFOs said they believe it will take six months or more to get back to “business as usual” after the pandemic ends, compared with 18% on average across all sectors.
“Consumer-facing companies have been hard hit by the sudden, sharp impact of COVID-19. They are buckling down for a potentially prolonged recession,” PwC noted.
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