Retailers see staffing challenges as omicron rages, gross sales taking a success

A sign saying “Now Hiring” is posted in an Urban Outfitters store in San Francisco.

David Paul Morris | Bloomberg | Getty Images

Retail executives presenting at the ICR virtual conference this week explain how the highly contagious Omicron variant drives sales and leaves stores and distribution centers understaffed.

But investors seem to be shrugging the bad news as they see it as a short-term challenge. For many retailers, the silver lining is that consumer demand appears to be well intact.

Lululemon said sales will be in the November-January quarter are at the lower end of their previous expectations because working hours had to be reduced at some locations due to a lack of labor. Lands’ End said it had been a difficult time hiring. Abercrombie & Fitch lowers its sales estimate for the fourth quarter because it didn’t have enough goods in stock to meet consumer demand. While Urban Outfitters said shoppers’ visits to its stores had not increased as planned in December, and were instead purchased on its websites.

Still, Abercrombie shares rose nearly 8% on Tuesday lunchtime, while its rival American Eagle Outfitter increased by about 3%. Urban Outfitters ‘stock rose nearly 2% and Lands’ End rose a little over 2%.

And these are just a few examples of how the recent surge in Covid cases in the US is sure to continue to rock the retail sector in the coming weeks. On Monday, around 1.5 million new cases of Covid-19 have been reported, according to data from Johns Hopkins University, bringing the seven-day average of new cases to 754,000 daily. While many vaccinated people infected with the virus say symptoms are mild, hospital admissions are on the rise, especially for those who get sick and are not fully vaccinated.

While these retailers may be weeks away from releasing full Christmas quarter results, the revised forecasts and comments provide analysts and investors with a preview of what’s to come. Companies from Lululemon to American Eagle are also shedding light on how to deal with the effects of omicron.

Work overtime

Lands’ End chief financial officer Jim Gooch said Tuesday that some employees had been working overtime in the past few weeks.

“We know that the work will be a big problem. … We hope this will normalize in the future, but this year has been a challenge,” he said during an ICR presentation. “And that’s why the teams are doing what they can to try to come out on top this year.”

Abercrombie & Fitch said Tuesday it was able to drag workers from one of its brands into stores of another brand in order to keep the doors open when workers call in sick. The company also owns Hollister and Gilly Hicks.

“In a mall where we have multiple brands and we have a staffing problem because we have a store that might come into contact with Covid, we can borrow staff from the other stores and that has helped us tremendously,” said Abercrombie Chief Executive Fran Horowitz, during an ICR presentation.

As a result, Horowitz said, Abercrombie has not had to close any stores entirely due to Covid outbreaks. However, it has temporarily reduced opening hours in some locations, she said. That’s an approach that companies take off Macys to gap to Nike also recently took.

“A little déjà vu”

“The first day of ICR 2022 was a little déjà-vu where we all sat in front of our computers and went from meeting to meeting with one click,” said Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group.

“Unfortunately, the Omicron variant of Covid-19 appears to have the negative impact we all feared on sales and staffing levels in January,” she said in a statement to customers.

Urban Outfitters reported Tuesday that sales for the two-month period ended December 31st were up 14.6% compared to 2019. Digital sales grew double-digit during this period, while in-store sales declined a low double-digit percentage on a two-year basis, the company said.

“We believe omicron affects our store sales … It’s hard to say how much,” said CFO Melanie Marein-Efron during an ICR presentation. “As soon as your stores start restricting their hours of operation, you are clearly limiting the ability of consumers to get into your store.”

American Eagle, which also owns lingerie brand Aerie, predicts fourth-quarter sales will increase a medium-to-high percentage of teenagers year over year. According to refinitive data, this is less than the 21.5% increase forecast by analysts.

However, American Eagle raised its expectations for sales in 2023 from $ 5.5 billion to $ 5.8 billion, suggesting the effects of Covid will be temporary.

“We think it will be short-term if there is any impact, and more isolated in January … maybe into February,” said Mike Mathias, CFO of American Eagle, when asked about omicron. “We share resources as needed between tips in specific stores.”

American Airways cancels greater than 700 flights, citing climate and staffing points

An American Airlines Boeing 777-300ER takes off from Sydney Airport in Sydney, Australia on October 28, 2020.

Loren Elliott | Reuters

American Airlines has canceled more than 1,000 flights since Friday, disruptions attributable to staffing problems and strong winds at its busiest hub.

On Saturday, American canceled nearly 460 flights, or 17% of the main flight schedule, according to flight tracking website FlightAware. based in Dallas Southwest Airlines Cut 86 flights or 2% of Saturday operations.

American has canceled another 285 flights, or 10% of its scheduled Sunday schedule, in addition to Friday’s 340 cancellations.

American COO David Seymour said in a staff note on Saturday that the problems began Thursday with strong gusts of wind reducing capacity at its Dallas / Fort Worth international airport hub and that the crew members were not in position for their next flights was.

The availability of pilots and flight attendants was cited as the reason for most of the cancellations on Saturday and Sunday, according to internal balance sheets viewed by CNBC.

“With additional weather throughout the system, our staff is running out as the crew members leave their regular flight sequences,” wrote Seymour. He said most customers were rebooked the same day and he expects operations to stabilize in November.

Airlines have faced staff shortages that have resulted in hundreds of flight cancellations and other disruptions since travel demand soared in late spring. The airlines had convinced thousands of employees to accept voluntary takeovers or leave of absence to reduce their wage bills in the depths of the pandemic.

Now they are trying to recruit staff, hire pilots, flight attendants, ramp and customer service agents and others. Leaner staffing levels make it harder for airlines to recover from disruptions such as bad weather or technology issues.

Southwest said earlier this month that there was a meltdown earlier this month that saw more than 2,000 flights canceled it cost $ 75 million. It also said it would further cut its remaining 2021 schedule after previous cuts to avoid further disruption.

American Airlines’ Seymour said 1,800 flight attendants would be returning from vacation as of November 1, and the rest would be back by December. It also means hiring pilots, mechanics, airport staff and reservation agents “so that more team members will be on site for the holiday season”.

Southwest Airways cancels 1,800 flights, blaming climate and staffing

Southwest Airlines This weekend, more than 1,800 flights were canceled, thousands of customers’ travel plans mixed up and flight crews stranded.

“I know this is incredibly difficult for all of you, and our customers are not happy,” said Alan Kasher, executive vice president of Daily Flight Operations, in a statement on Sunday viewed by CNBC.

The airline blamed bad weather and an “FAA-imposed air traffic management program” for the initial problems.

“Although we were staffed for the weekend, we could not foresee the significant disruption caused by unexpected ATC problems and bad weather at our Florida stations,” said Kasher.

Other airlines have canceled relatively few flights. Southwest did not comment on the inequality.

The Federal Aviation Administration said there were “several hours” of flight delays on Friday afternoon due to severe weather and staffing problems at the Jacksonville Air Route Traffic Control Center, which controls the airspace in five parts of Alabama, Georgia, Florida, North Carolina and South Carolina.

“No staff shortages have been reported to the FAA in air traffic since Friday,” said the FAA. “Some airlines continue to have scheduling problems due to out of seat aircraft and crews. Please contact the airlines for details on current flight schedules.”

Southwest’s top destinations, Denver, Baltimore, Dallas Love Field and Chicago Midway, were hardest hit by Sunday’s cancellations.

Southwest apologized to travelers for long customer service waits. The airline said in a statement that it is expected to get close to normal operations by Sunday, but disruptions worsened.

Southwest’s Kasher admitted to staff in his note on Sunday that some crew members were out of hotel rooms last night and said disruptions can arise quickly when flight crews reach contractual and state working limits.

“Right now is ours [network operations center] The teams are working to protect our crew network and prevent bad connections – both for our crews and for our customers – that would have an even bigger impact, ”he said. “And the teams are working to determine the best course of action to be the quickest way to reset our network. “

The Dallas-based airline canceled 1,019 flights on Sunday, 28% of its schedule, after canceling 808 flights on Saturday, according to flight tracking website FlightAware. American Airlines, which operates a major hub in Miami, has canceled 66 mainline flights, or 2% of its operations on Saturday and Fort Lauderdale, Florida, by comparison Spirit Airlines 32 flights canceled, 4% of the flight plan.

Staff shortages resulted in hundreds of cancellations at Southwest this summer. the The airline has cut its flight schedule after the summer to avoid further disturbances. Other airlines have also faced labor shortages after encouraging thousands to take or buy vacations at the height of the pandemic, only to have travel demand return faster than expected this summer.

“Although we made changes to the timetable by autumn, our route system has not fully recovered – that will take time,” said Kasher. He said the airline had fewer frequencies between major airports to reroute or rebook travelers. Southwest doesn’t have what is called the interline arrangement that major airlines like delta and American Travelers have to book with other airlines.

Southwest did not immediately comment on whether staffing shortages contributed to the cancellations this weekend.

The airline is struggling to hire new employees. New CEO Bob Jordan told CNBC last month that the airline was ready to cut flights during the spring break if it doesn’t have enough staff to support the operation.

The inequality between the operations of Southwest and other airlines fueled speculation on social media that employees called in sick, with some suspecting it was in protest of the vaccine mandate.

The Southwest Airlines Pilots Association, the Southwest pilots union, said, “We can say with confidence that our pilots are not participating in any formal or unofficial work-related activities.”

“Our pilots will continue to overcome poor planning by SWA management as well as any external operational challenges and remain the most productive pilots in the world,” it said.

Earlier on Saturday, the union noted that the company’s recent announcement that it would comply with the Biden government’s requirement that federal contractors commission Covid vaccinations for employees is adding to the distraction for airmen.

“Make no mistake – due to months of personnel problems and inefficient planning practices, we are working with a higher than normal operational risk,” the union’s safety committee told members in a post on Saturday.

It is said that reports of fatigue requiring pilots not to fly are triple historical norms.

“All of these challenges created an additional distraction in the cockpit,” it said. “The company’s announcement this week of the COVID-19 vaccine mandate only exacerbates the situation.”

On Friday, the union asked a federal court in Dallas to temporarily block implementation of the vaccine mandate as it was a unilateral decision and required negotiations with the union instead.

American Airways cancels flights as a consequence of staffing, upkeep points

American Airlines planes at LaGuardia Airport

Leslie Josephs | CNBC

American Airlines said it canceled hundreds of flights this weekend due to staff shortages, maintenance and other issues, challenges for the airline as travel demand rises to pre-pandemic levels.

According to flight tracking site FlightAware, about 6% of the airline’s main flight schedule or 180 flights were canceled on Sunday. The airline said this represented about 3% of its total flights, including those operated by regional airlines. About half of them because of unavailable flight crews, showed a company list that was viewed by CNBC. About 4% or 123 flights were canceled on Saturday, the website showed.

American said it was cutting its overall plan by about 1% by mid-July to alleviate some of the disruption, some of which was due to bad weather at the hubs of Charlotte International Airport and Dallas / Fort Worth in the first half of June.

“The bad weather, combined with the labor shortage that some of our suppliers are struggling with, and the incredibly rapid rise in customer demand, has led us to make our operations even more resilient and safer by cutting a fraction of our planned flight times by mid- July, “American Airlines spokeswoman Sarah Jantz said in a statement. “We have made targeted changes with the aim of influencing the least possible number of customers by adjusting flights in markets where we have multiple options for rebooking.”

Bad weather has adversely affected flight crews’ ability to get to assigned flights, and bad weather can cause crews to drop outside of working hours they are allowed to work at the federal level, the spokeswoman said.

Dennis Tajer, spokesman for the Allied Pilots Association, which represents the roughly 15,000 American pilots, said the company should offer more overtime upfront to encourage staff to fill out, as well as more flexibility in pilot plans to cover staff shortages.

“You’re trying to put a plaster on something that needs sewing,” said Tajer, who is also the captain of a Boeing 737.

American is also rushing to train any pilots it has taken on leave between two state aid packages that prohibited layoffs, as well as its Airmen due for regular recurring training. Jantz said American is well on its way to completing the training of pilots on leave by the end of this month, adding that the company is offering overtime due to its operational issues.

Delta Airlines canceled more than 300 flights last Thanksgiving weekend and many others during the holiday season a Lack of pilots.

The weekend disruption previously reported on the airline’s View from the Wing blog comes just as airlines are trying to capture spikes in travel demand and curb record losses. American said in a filing earlier this month that capacity will decline 20 to 25% in the second quarter from 2019 while United Airlines said it expected its capacity to decrease by about 46% and delta forecast a decrease of 32% compared to 2019. Southwest Airlines predict July capacity will lag just 3% from 2019, down from a 7% decline this month.