Uber to lay off 3,700 employees, about 14% of workforce

Uber said Wednesday it will lay off 3,700 employees and that CEO Dara Khosrowshahi will forgo his base salary for the rest of the year.

The layoffs to its customer support and recruiting teams represent about 14% of its 26,900 employees, based on Uber’s most recent headcount.

Khosrowshahi made $1 million in base salary in 2019 but gained the vast majority of his compensation from bonuses and stock awards.

The moves were announced in a filing with the Securities and Exchange Commission.

Uber’s stock fell as much as 4% Wednesday but ended the trading day down 0.9%.

Uber has been hit hard by the coronavirus pandemic, which has crushed the travel industry because of lockdowns to stop the spread of the virus. Uber’s global gross bookings are down 80%, according to a report from The Information last month. Investors will get a greater sense of the impact on Thursday when Uber reports earnings.

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Capital One to Keep Most Staff Home Until at Least September

Capital One Financial Corp., potentially setting a standard for the U.S. financial industry, plans to keep most employees working at home at least four more months as it waits for the coronavirus pandemic to ebb.

The lender’s offices in the U.S., Canada and the U.K. will remain shut to all non-essential staff at least through the Labor Day holiday on Sept. 7, Chief Executive Officer Richard Fairbank wrote in an internal memo. He promised employees that the McLean, Virginia-based firm will give them at least six weeks’ notice once it decides to reopen those sites.

That’s one of the strongest signs yet that legions of industry employees using makeshift work stations at home may have to wait much longer to return to their offices, even as many states begin lifting restrictions on public life. Capital One, which earns most of its revenue from its massive credit card business, said in late March it had more than 40,000 people doing their jobs remotely online, accounting for more than three-quarters of its workforce.

Many major financial firms have yet to publicly set dates for reopening offices as they grapple with numerous challenges, such as how to help employees safely commute, ascend elevators and navigate shared workspaces. And those that have weighed in on the topic have expressed caution. At Citigroup Inc., for example, President Jane Fraser said last month that the firm will conduct its own analysis of risks and won’t necessarily reopen offices just because local authorities issue all-clears.

Goldman Sachs Group Inc. executives told employees on Tuesday the firm is “carefully thinking about a gradual ‘return to office’ framework” for operations around the world, noting staff in Hong Kong, mainland China, Stockholm and Tel Aviv have started going back. Credit Suisse Group AG employees were told to expect to return in four phases.


Gold’s Gym International Files to Restructure Under Chapter 11 Due to COVID-19 Pandemic

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Gold’s Gym International, Dallas, filed for Chapter 11 on May 4 as a way to financially restructure the company after the worldwide shutdown of businesses from the COVID-19 pandemic affected the company, CEO Adam Zeitsiff shared with Club Industry.

The filing is for the corporate entity and does not involve franchisees, who make up the majority of Gold’s Gym locations, Zeitsiff said. He expects the company will emerge from Chapter 11 by Aug. 1, if not sooner.

“We are filing this to restructure the company, and this is strictly as a result of the pandemic,” Zeitsiff told Club Industry. “We were on a massive turnaround. We were refranchising stores, awarding company-owned stores to franchisees. We were all over the place growing our business. We were ahead of plan for the year. And then COVID-19 hit, and this is simply our way of acting swiftly to ensure we have a long-term viable and sustainable business.”

In fact, Gold’s Gym International had just come off its strongest year of worldwide growth in company history, finalizing 22 American franchise agreements and opening 35 locations in 2019, the latter of which was a company record, the company shared in January. In early March prior to the COVID-19 shutdowns, Gold’s Gym refranchised 24 locations in the Washington, D.C., area and refranchised two locations in Los Angeles and eight in Tennessee.

But the COVID-19 pandemic caused Gold’s Gym International to temporarily close all of its company-owned gyms on March 16. That week, it froze membership dues at its company-owned clubs, and that month it also furloughed 98 percent of employees at company-owned gyms.

Zeitsiff declined to share how much money the closures have cost Gold’s Gym, but during this time, the company has brought in no membership revenues, royalty revenue or other revenue, except minimal revenue from licensed apparel, products and consumables.


Rolls Royce Braces for Turmoil With 8,000 Jobs on the Line

Rolls Royce

Rolls Royce Holdings Plc is likely to be a much smaller company in the coming years with aerospace facing an uncertain future.

The company is considering a 15% cut to its workforce as the aviation industry contends with an unprecedented crisis because of the coronavirus pandemic, a person familiar said last week. Senior executives at the maker of jet engines have yet to finalize reductions of that magnitude and talks with labor unions are continuing.

The maker of widebody engines is particularly exposed to the fallout of the pandemic. The long-haul flights which use its engines are likely to be the last to recover, meaning the downturn in demand may last for a while. Rolls-Royce had already restructured the business after engine problems but now faces a smaller market with aircraft makers Airbus SE and Boeing Co. both slashing production rates.

“Such action at some point appeared inevitable,” said Sandy Morris, an analyst at Jefferies. “We forecast full year group sales down 12%, but civil aerospace revenue down 18% mainly due to lower engine deliveries. The bad news really all happens in 2020.”

Rolls-Royce confirmed the likelihood of job cuts without quantifying their possible extent, saying in a statement Friday that further action was needed to reduce spending and strengthen the company. It has promised employees more details before the end of the month.

The company’s shares fell as much as 8.3%, and were down 3.4% as of 8:49 a.m. in London. Rolls-Royce has lost about 57% of its market value this year.


Airbnb to Lay Off Nearly 1,900 People, 25% of Company

Airbnb plans to lay off nearly 1,900 employees, or about 25% of the company, a person familiar with the plans confirmed to CNBC.

The layoffs were first reported by The Information, which reported the news would be broken to employees by CEO Brian Chesky in a call starting around 3pm ET.

“We are collectively living through the most harrowing crisis of our lifetime, and as it began to unfold, global travel came to a standstill,” Chesky told employees according to a copy of his prepared remarks. “Airbnb’s business has been hit hard, with revenue this year forecasted to be less than half of what we earned in 2019.”

Prior to the layoffs, Airbnb had 7,500 employees, Chesky said. Airbnb will halt projects related to hotels, a transportation division and luxury stays, Chesky said.

“Travel in this new world will look different, and we need to evolve Airbnb accordingly,” he said.

U.S. employees laid off will receive 14 weeks of base pay plus an additional week for every year they worked at Airbnb, Chesky said. Airbnb will also provide 12 months of healthcare for laid off U.S. employees, Chesky said. May 11 will be the last work day for impacted Airbnb employees in the U.S. and Canada, Chesky said.


J. Crew files for Chapter 11 bankruptcy…

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Even as some retailers begin to open stores again, the pain across malls and main streets continues to take its toll.

J. Crew Group Inc. on Monday said it would begin pre-arranged Chapter 11 bankruptcy proceedings and enter into a $1.65 billion debt-for-equity swap with its lenders, becoming the first major U.S. retailer to succumb to the economic convulsions caused by the coronavirus pandemic. It won’t be the only casualty.

Other chains are grappling with the same issues: heavy debt loads, compounded by the damage done from locations closed for weeks. Neiman Marcus Group Inc. is closing in on a bankruptcy deal with a group of lenders, Bloomberg News reported on Monday, citing people with knowledge of the matter, and J.C. Penney Co. is reportedly in talks on a loan that would fund it through a restructuring. Meanwhile, Victoria’s Secret-owner L Brands Inc. said late Monday that it agreed to terminate plans to sell a majority stake in the lingerie chain to private equity firm Sycamore Partners. Jefferies analyst Randal Konik had warned last month of potential medium-term solvency issues at L Brands after Sycamore sued to get out of the transaction, citing a collapse in sales and looming debt maturities.

Every brand has its own story. In the case of J. Crew, it was one of the first mainstream U.S. retailers to gain real traction with the fashion crowd, and in its heyday was also ahead of its time in areas such as store design. The leadership of former chief executive Mickey Drexler and creative director Jenna Lyons took its preppy styles from classic to cutting edge, all helped by the brand being a favorite of Michelle Obama. But its trendy designs eventually alienated some customers, and when the power partnership came to an end in 2017, it never regained its stride. With cheaper competitors such as Inditex’s Zara and a resurgent Ralph Lauren Corp at the top end, J. Crew had to rely on incessant discounting.

J. Crew had hoped in recent months to spin off its faster-growing, denim-focused  Madewell arm as it sought to cut borrowings of almost $1.7 billion as of February. But plans for the initial public offering were scuppered by the pandemic, and it was left struggling to deal with its debt, a legacy from its 2011 leveraged buyout by TPG Capital LP and Leonard Green & Partners LP.


United Airlines to dump 4,000 pilots…

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United Airlines UAL this weekend began the process by which it could eliminate the jobs of more than a third of its 12,250 pilots as soon as Oct. 1.

And the airline’s chief pilot warned that unless travel demand rebounds this summer much stronger than they anticipate, a lot more pilots could be pushed into the unemployment lines, along with corresponding numbers of mechanics, flight attendants, ground workers, administrative staff and managers.

United on Saturday sent its pilots an email announcing a bid for work slots effective June 30 that involves the “displacement” of 4,457 positions. That makes United the first U.S. airline to disclose its staff reduction plans in response to the COVID-19 pandemic and its staggering impact on travel. United, like nearly all U.S. carriers, received large grants and low interest loans from the federal government aimed at keeping their staff employed across the summer and ready for a swift return of travel demand. United’s share of those grants and loans totaled about $5 billion, roughly half of which already has been received with balance to arrive in a few weeks.

Now, a quick rebound in travel appears highly unlikely.

GE to slash 13,000 jobs in aviation amid air travel plunge

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General Electric will cut about 13,000 jobs from its jet-engine operation, in the latest sign of the devastating impact of the coronavirus outbreak on global air travel.

The reductions, going well beyond cuts announced in March, will include “voluntary and involuntary actions” affecting about 25% of GE Aviation’s workers worldwide, the company said Monday in a statement. The total includes a previously announced move to cut about 2,600 positions in the U.S.

“The deep contraction of commercial aviation is unprecedented, affecting every customer worldwide,” GE Aviation Chief Executive Officer David Joyce said in the statement. “We have responded with difficult cost-cutting actions over the last two months. Unfortunately, more is required.”

The job cuts, coming after GE last week reported deep financial strains in its jet-engine manufacturing division, underscore the severe impact of the pandemic on aviation and the broader economy. Planemakers Boeing and Airbus, along with airlines worldwide, have launched desperate efforts to preserve and raise cash as demand has fallen sharply.


Ticketmaster North America Furloughs a Quarter of Company’s Employees

Ticketmaster North America has furloughed a quarter of its workforce, sources confirm to Variety, in one of the most tangible signs yet of the severity of the coronavirus pandemic’s effect on the concert industry.

The hundreds of affected employees were alerted Tuesday in a conference call that was followed by a letter from Ticketmaster president Jared Smith.

“For the very first time in the history of live entertainment, the industry is completely shut down — something that a few short months ago would have seemed incomprehensible,” Smith said in the letter to employees, a copy of which was obtained by Variety.

“Since the beginning of this global crisis,” he continued, “we have operated with the goal of staying true to our company’s core philosophy of ‘taking care of our own.’ This is why we continued to keep our team at full pay through March and April, even as the tens of thousands of events we support and sell ground to a halt.”

Smith praised the staff for its crisis response in the midst of revenue grinding to a halt and said that “this team spirit and camaraderie made the decision to furlough a portion of our workforce all the more difficult. I assure you, however, that this decision was arrived at with great consideration and care. Without a doubt, this is the hardest decision I have faced in my tenure leading this great organization but it is one I feel is necessary to protect the future of our company.”


Saks Fifth Avenue Is Latest Mall Anchor To Prepare For Bankruptcy Filing

Macy’s, JCPenney, Neiman Marcus, and now Saks Fifth Avenue: in just a few weeks, the four core pillars and anchor tennants of the US mall sector will file for bankruptcy.

While we previously reported that the former two retail icons had entered their bond grace period ahead of filing a formal Chapter 11 bankruptcy petition, on Wednesday afternoon Bloomberg reported that Hudson’s Bay Co had also missed its April payments on at least two commercial mortgage-backed securities that were part of $696 million in financing for Saks Fifth Avenue and other stores.

The securities, originated in 2015, were current until this month when the company missed interest-only debt payments totaling only $3.2 million, according to data compiled by Bloomberg and a person familiar with the matter. According to Bloomberg, the missed payments were on securities that financed 34 properties – 10 Saks and 24 Lord & Taylor stores. The Saks locations include Beverly Hills, California, Atlanta, Chicago and Miami.

Demonstrating the shock to the retail sector over the past month, almost 11% of retail CMBS loans were as much as 30 days delinquent this month, up from 1.7% in March, according to an April 23 report by the CRE Finance Council, a commercial real estate trade group.