First the pandemic hit them. Now retailers and restaurants have to rebuild after protests

Key Points
  • The protests have only added to retailers' mounting list of challenges as some stores have been damaged and looted or had to close early because of curfews.
  • "It's a national disaster within a national disaster," said Forrester retail analyst Sucharita Kodali.
  • A number of retailers have issued statements, both internally and publicly, acknowledging the heightened tension about race relations or addressing the fallout of protests over the weekend.
Police gather in front of a Lowe's hardware store to arrest looters during widespread unrest following the death of George Floyd on May 31, 2020 in Philadelphia, Pennsylvania.
Mark Makela | Getty Images

Retailers and restaurants shuttered by the coronavirus pandemic had just started to reopen their businesses. Employees at big-box stores worked to restock shelves and resume more typical store hours.

But in recent days, nationwide protests prompted by the death of George Floyd in Minneapolis have led to shattered storefronts and looting and forced many doors back shut. 

Over the weekend, protesters marched across cities including New York, Dallas, Atlanta and Chicago, with signs and calls for justice for Floyd, an unarmed man who died as a Minneapolis police officer kneeled on his neck. Violent clashes with police and property damaged ensued, and mayors responded with citywide curfews, further ratcheting up tension.

The protests have left behind jarring images across the country: Boarded-up windows at Amazon-owned grocer Whole Foods. Looted Chanel and Coach stores in Manhattan's luxury SoHo and Fifth Avenue shopping districts. A vandalized Nordstrom flagship store in Seattle. And a Target in Minneapolis that's so damaged, it will need to be rebuilt.

In downtown Dallas, glass windows across the front of Neiman Marcus' flagship store were smashed, adding to the burdens that the luxury department store chain already faces in bankruptcy court.

The protests have added to retailers' and restaurants' mounting list of challenges. The companies have had to work hard to stay in business, as stay-at-home orders shut shopping malls, halted dine-in food service and shifted entire businesses online. Many have furloughed thousands of employees, slashed executives' salaries and drawn down credit lines. And some are at risk of joining J.Crew, J.C. Penney, Tuesday Morning and Stage Stores in filing for bankruptcy. 

At stores that remained open as essential retailers, such as Walmart and Target, hourly workers took on new risks as they dealt with a surge of frenzied shoppers — and some got sick and died from Covid-19. The pandemic amplified simmering tensions about low pay and working conditions, and led some workers to strike. 

"It's a national disaster within a national disaster," said Forrester retail analyst Sucharita Kodali. "You'd have to go to a movie to look for this level of catastrophe." 

One of the industry's national trade groups, Retail Industry Leaders Association, acknowledged the disruption of protests on retailers' recovery.

"There was a feeling in recent weeks that things were headed in the right direction, and that carefully reopening the economy was possible, and that a sense of normalcy was around the corner," its president Brian Dodge said in a statement. "But the senseless death of George Floyd and the ensuing violence of the last few nights has shattered more than storefronts, it has broken the fragile confidence of a nation already struggling with anxiety, frustration, and fear."

'Match on smoldering embers'

Concerns about an unequal criminal justice system may have fueled the protests, but they have not been the only motivator, said Witold Henisz, a professor of management at the Wharton School at the University of Pennsylvania. He said the pandemic has underscored stark differences between Americans who have access to health care, child care, a good education, a living wage and even jobs that allow them to work remotely — and those who do not. 

More than 41 million Americans have lost their jobs during the pandemic. More than 104,000 have died from Covid-19. And he said a disproportionate number of those who have gotten sick, died and lost jobs are minorities who already felt left out and left behind.

Floyd's death was "a match on smoldering embers," he said.

Edelman CEO: Brands must stand up on racism
Edelman CEO: Brands must stand up on racism

At many companies, executives have had to navigate if — or how — to wade into a public debate over race relations. They have also had to figure out how to talk to employees, including some who have had their own experiences with discrimination, and many who have been stressed by health worries or struggles to pay the bills during the pandemic. 

A number of retailers have issued statements, both internally and publicly, acknowledging the heightened tension about race relations or addressing the fallout of protests over the weekend. And many of those messages have since been spread widely across social media platforms. 

The protests have underscored inequities reflected in the business world, too. Only four Fortune 500 companies are led by black chief executives: Lowe's Marvin Ellison, Tapestry's Jide Zeitlin, Merck's Ken Frazier and TIAA's Roger Ferguson. 

In a letter to Lowe's employees Saturday, Ellison said he grew up in the segregated south and listened to stories from his parents about their own experiences with racism. 

"I have a personal understanding of the fear and frustration that many of you are feeling," he said. "To overcome the challenges that we all face, we must use our voices and demand that ignorance and racism must come to an end."

In a tweet, he said he and his wife "feel tremendous sadness" for the families of Floyd, Ahmaud Arbery and Breonna Taylor. Arbery and Taylor are two unarmed African Americans recently shot to death.

"As the father of a young black male, I can only imagine their pain & emptiness," he said on Twitter.

Zeitlin, CEO of Coach and Kate Spade owner Tapestry, said in a note posted to Instagram that "the time is now for meaningful action." Zeitlin, who was born in Nigeria and adopted by an American family, said the retailer will share more details soon about plans to work with "a number of social justice, legal and corporate entities."

Assessing the damage

Nike, which also had stores looted over the weekend, went a step further, putting out a new ad campaign encouraging Americans not to look away from racial injustice. "For once, Don't Do It ... Don't pretend there's not a problem in America," the video reads. 

The company previously made activist and former NFL quarterback Colin Kaepernick the face of a widely lauded yet controversial ad campaign. Kaepernick protested police brutality by kneeling during the national anthem when he played for the San Francisco 49ers. 

Adidas later reshared Nike's message on its Twitter account, saying, "Together is how we move forward. Together is how we make change." 

The German-based sneaker maker also had stores damaged in the U.S. over the weekend and has decided to close all of its American shops until further notice, a spokesperson said. 

Under Armour Chief Executive Patrik Frisk took to Twitter over the weekend to write: "The overnight escalation of protests across the country have left me at a loss for words and show that people are tired, angry, frustrated, and scared. I know many of you are tired of hashtags. I know you are tired of talking. I know you are tired of injustice." 

Meantime, department store operator Macy's Chief Executive Jeff Gennette wrote to employees in a memo posted on its Instagram and Twitter accounts: "While we cannot always control what happens outside of our stores and facilities, we can shape the culture within." 

He said the company has reduced store hours and closed some locations in cities including Minneapolis and Atlanta. A Macy's spokesperson confirmed the retailer has "sustained damage in a number of stores" and is still "assessing the impact." 

Minneapolis, MN May 27: Looters entered the Target store on Lake Street and made out with merchandise on the second day of protest in the death of George Floyd.
Richard Tsong-TaatariI | Star Tribune | Getty Images

Many retailers, including Best Buy and Walgreens, said they've had to close stores because of damage. More than 250 CVS stores across 21 states were damaged and about 60 stores are still closed, company spokesman Mike DeAngelis said.

More than 200 of Target's stores were closed or had adjusted hours over the weekend, company spokesman Joshua Thomas said. Six have been closed until further notice after sustaining major damage. 

People are going to expect the companies they work for, the companies they shop from to be engaged in the process of reconciliation and addressing these issues.
Witold Henisz
Professor, Wharton School

One of the Minneapolis-based retailer's badly damaged and now closed stores is near where Floyd died. In an open letter to employees, Target Chief Executive Brian Cornell committed to rebuilding that store. He said the company is distributing truckloads of bottled water, diapers, first aid equipment and other essentials to areas damaged during demonstrations. He said Target will pay hundreds of employees who have been displaced by the store closure. 

"As a Target team, we've huddled, we've consoled, we've witnessed horrific scenes similar to what's playing out now and wept that not enough is changing," Cornell said. "And as a team we've vowed to face pain with purpose." 

Companies should be able to recuperate the sales that they can prove were lost because of damage from protests, said Rebecca Kolb, an associate in the litigation and international business practice group at law firm Arnall Golden Gregory. 

"Generally speaking, a commercial property insurance policy should cover this type of damage to your business ... as long as there is actually physical damage or loss," she said.

But she said the Covid-19 crisis adds complexity. Most insurance policies do not cover damage from a pandemic.

"You now have these two huge events happening under the same insurance policy," Kolb said. "But for something like [the protests], you've got physical damage and you can walk up and see it. This is so much cleaner than anything related to Covid under a policy." 

Diners return, then vanish

For restaurants, civil unrest comes as many try to lure customers back to dining rooms. The pandemic hit the full-service restaurant industry the hardest, as governors forced dining rooms to close and cash-strapped customers bought groceries or fast food instead. 

The Atlanta-based Castellucci Hospitality Group, for example, reopened two of its restaurants on Friday and saw some customers return. But this weekend's protests and the resulting curfew issued in the city has halted demand, according to owner Fred Castellucci.  

"Business eventually just evaporated," he said on CNBC's "Squawk on the Street."

None of his restaurants were damaged. Castellucci still plans to bring the rest of his restaurant group's locations back this week.

Fast-food giant McDonald's and its franchisees have closed a small number of locations temporarily in response to protests. During the pandemic, the vast majority of its restaurants have remained opened for drive-thru, delivery and takeout service.

Still, stay-at-home orders have hurt McDonald's sales, although fast-food restaurants are rebounding faster than the overall industry.

In a LinkedIn post, McDonald's U.S. head Joe Erlinger acknowledged that in the past, the company has stayed silent on issues that do not directly affect its business. But as part of his promise to be transparent and communicate openly, he shared his thoughts on recent events, saying that he was "appalled." 

"I will not speak to – nor will I claim to fully understand – how events like these affect African Americans and people of color," Erlinger wrote. "However, I see and recognize the impact these events have at an individual and collective level. And, when any member of our McFamily hurts, we all hurt."  

Two senior McDonald's executives sued the company in January, alleging racial discrimination. The lawsuit names McDonald's current CEO Chris Kempczinski as a defendant. The company said at the time that it disagreed with the complaint's characterizations but would review it and respond accordingly.

On Saturday, Starbucks held a forum for its employees to discuss "the murders of George Floyd, Ahmaud Arbery and Breonna Taylor and the many other racial injustices that have shaken the entire country and each one of us," according to a letter to baristas from CEO Kevin Johnson. 

"We have always believed in being a different kind of company," Johnson wrote. 

Henisz of Wharton said retailers, in particular, are "very visible elements of a community" that people drive and walk by each day. He said people, especially millennials, will look to their leaders in the coming weeks and months to see if they take meaningful action, such as donating to food banks and participating in public policy, not just release corporate statements. 

"There have been times in American history where companies have stepped up and been part of shifting the dialogue," he said. "We're there now with economic inequality and racial justice. People are going to expect the companies they work for, the companies they shop from to be engaged in the process of reconciliation and addressing these issues."

Retailers' plans to reopen halted by mass protests
Retailers' plans to reopen halted by mass protests