Ross Stores Sued After Allegedly Skipping Out on $5.5 Million in Rent Payments

Ross Stores Inc. is being sued by one of its landlords.

In a filing in Florida district court yesterday, Palm Springs Mile Associates Ltd. claimed that the off-price retailer owes $5.5 million in unpaid rent on three of its Florida stores. According to the complaint, Ross Stores skipped out on rent payments due May 1 and “has further advised that its non-payment of rent will continue, as a result of the circumstances related to COVID-19.”

Palm Springs Mile says it recognizes “the challenges posed by COVID-19, including on [its] own business.” However, under the terms of its leasing agreements, the company said Ross Stores is “obligated to pay rent and that obligation is not excused.”

Ross Stores’ fleet of stores were shut in mid-March due to the novel coronavirus. Beginning on April 5, the Dublin, Calif.-based company furloughed the majority of its workers, with employees to continue to receive eligible health benefits while on temporary leave. CEO Barbara Rentler and chairman Michael Balmuth announced they would forgo their salaries during the furloughs. Other members of the senior executive team also took pay cuts of 20% to 50%.

Since March, several brick-and-mortar fashion retailers announced that they would not pay their landlords while stores are shuttered in accordance with government orders aimed at curbing the spread of the novel coronavirus. Urban Outfitters Inc., parent to its namesake brand as well as Free People and Anthropologie, announced in late March that it would not pay rent on a temporary basis and would also defer or cancel planned store openings for the year. Meanwhile, cash-strapped Gap Inc. said it did not pay its roughly $115 million in monthly rental payments in April as stores stayed shut. And Victoria’s Secret parent L Brands Inc. also said it would not pay rent with doors closed.

Over the past few years, amid broader industry struggles, off-price has been a bright spot in the brick-and-mortar retail space — something executives and analysts have attributed to a “treasure hunt” experience that cannot easily be replicated online. For this reason, Ross and fellow off-pricers The TJX Companies Inc. and Burlington Stores Inc. have focused predominantly on their physical stores despite retail’s broader push into digital, with Burlington announcing in April that it would wind down its online business. Ross, meanwhile, announced plans in March to open roughly 100 stores — 75 Ross Dress for Less and 25 dd’s Discounts locations — in 2020. But as COVID-19 reshapes daily life for most consumers, limited e-commerce presence combined with a downturn in discretionary spending could weigh on off-pricers’ balance sheets, analysts suggest.

A Ross Stores representative did not immediately respond to FN’s request for comment.

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