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Coronavirus update: Global case tally climbs to 9.5 million and rising cases in U.S., Brazil and others show pandemic is far from over

Macy’s to cut 3,900 jobs in latest cost reduction effort, and Olive Garden parent Darden Restaurants posts better-than-expected sales

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By Ciara Linnane, MarketWatch

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“Although you can never guarantee at all the safety and efficacy of a vaccine until you actually test it in the field, we feel cautiously optimistic based on the concerted effort and the fact that we are taking financial risks,” Fauci testified during a Committee on Energy and Commerce hearing on Tuesday, “not risks to safety, not risk to the integrity of the science, but financial risks to be able to be ahead of the game.”

Moderna Inc. /zigman2/quotes/205619834/composite MRNA +1.41%  , meanwhile, said that Catalent Inc. /zigman2/quotes/206700489/composite CTLT -2.67% will handle vial filling and packaging for its COVID-19 vaccine candidate if it proves to be safe and efficacious. That news sent both stocks higher in early trade.

What’s the economy saying?

New applications for traditional jobless benefits fell slightly last week to 1.48 million, but they remain stubbornly high three months after the start of the coronavirus pandemic and signal that a fledging economic recovery is likely to be uneven, as MarketWatch’s Jeffry Bartash reported.

Initial jobless claims, a rough gauge of layoffs, dipped in the seven days ended June 20 from 1.54 million in the prior week, the Labor Department said Thursday. The figures are seasonally adjusted.

While it marked the 12th straight decline, new claims are still extremely high and raise questions about whether a small rebound in the economy, after a prolonged coronavirus-tied shutdown, is about to hit a wall.

Economists polled by MarketWatch had forecast a seasonally adjusted 1.38 million new claims. These figures reflect applications filed the normal way through state unemployment offices.

See also: U.S. entered recession in February after end of longest expansion in history, NBER finds

If people who applied for benefits through a temporary federal program are included, new claims totaled an unadjusted 2.19 million last week. That was down slightly from a revised 2.2 million.

“The concern is what the July and later months could show, given still high initial claims and rising Covid-19 case counts in many states” wrote economists Andrew Grantham and Katherine Judge of CIBC Capital Markets.

See: MarketWatch’s Coronavirus Recovery Tracker

The Commerce Department released its final estimate for first-quarter GDP and stuck with a 5% pace of contraction as previously estimated. Federal Reserve officials and private-sector economists have forecast an unprecedented contraction in GDP in the April-June quarter. Economists surveyed by MarketWatch expect a decline at a 29.5% annual rate. The data will be released on July 30.

A separate report found the U.S. trade deficit in goods widened 5.1% in May as exports fell sharply. The gap in goods widened to $74.3 billion in May from a revised $70.7 billion in the prior month. That is a much wider than the $66.5 billion estimate of economists polled by MarketWatch.

Exports of goods dropped $5.5 billion to $90.1 in May. Imports fell $1.9 billion to $164.4 billion.

The report also showed a 1.2% decline in wholesale inventories in May, and advanced retail inventories were down 6.1%. Excluding autos, retail inventories were down 1.5%.

What are companies saying?

Macy’s Inc. /zigman2/quotes/201854387/composite M +5.38%  is cutting 3,900 workers in its latest cost reduction effort because of the impact of the pandemic. The news disappointed investors, coming after a recent announcement from the department-store chain that reopened stores were performing strongly.

There was better news from Olive Garden parent Darden Restaurants Inc. /zigman2/quotes/200092615/composite DRI -0.80% , which reported narrower-than-expected losses for its fiscal fourth quarter and sales that beat expectations. The company, which also owns LongHorn Steakhouse and The Capital Grille, saw big declines in same-restaurant sales, but trends are improving as more outlets reopen and the company is generating positive operating cash flow.

“As our industry continues to rebuild, there is significant opportunity to increase market share,” said Gene Lee, Darden’s chief executive, in a statement.

Spice and condiment maker McCormick & Co. Inc. /zigman2/quotes/206739653/composite MKC -2.37%  reported better-than-expected earnings for its fiscal second quarter, buoyed by an increase in at-home dining.

Here are the latest things companies have said about COVID-19:

• Ally Financial Inc. /zigman2/quotes/206227672/composite ALLY +0.03%  Cardholder Management Services Inc. (CardWorks) agreed to call off their merger deal, because of the “unprecedented economic and market conditions” resulting from the pandemic. “ [CardWorks CEO] Don Berman and I, along with our boards of directors, believe it is in the best interests of our customers and stakeholders to terminate the agreement,” Ally Chief Executive Jeffrey J. Brown said in a statement.

• Apple Inc. /zigman2/quotes/202934861/composite AAPL +0.29% is temporarily re-closing seven stores in the Houston area amid a resurgence of COVID-19 cases in Texas. The company is temporarily shutting its Highland Village, First Colony Mall, Houston Galleria, Memorial City, Willowbrook Mall, Baybrook, and Woodlands locations “with an abundance of caution” given “current COVID-19 conditions in some of the communities we serve.” The move comes after Apple last week moved to temporarily shut some locations in Florida, Arizona, North Carolina, and South Carolina, according to reports. Apple was among the first to shutter locations outside of China in March as the pandemic worsened, though the company has been gradually reopening stores with some restrictions on in-store activities.

• CEC Entertainment Inc., the parent of Chuck E. Cheese and Peter Piper Pizza, filed for Chapter 11 bankruptcy, weighed down by restaurant closures during the pandemic. The company will use the time to continue talks with its financial stakeholders, including landlords, to “achieve a comprehensive balance sheet restructuring that supports its reopening and longer-term strategic plans.” As of June 24, 266 company-operated restaurant and arcade venues had reopened for business. The company is expecting to keep these venues open through Chapter 11 and to offer dine-in, delivery and take-out services. The company’s non-U.S. franchise partners and corporate entities are not included in the process.

• Chico’s FAS Inc. /zigman2/quotes/203348060/composite CHS +7.59% will return its executives to full pay effective July 5 after putting wage cuts in place as a cost-saving measure during the pandemic. Executive pay was halved starting April 5. The decision comes as stores begin to reopen and sales start to improve. Other compensation has been restored as well, including the board’s annual cash retainers and non-furloughed employees, except for distribution center workers who never experienced a pay cut. Chico’s portfolio includes the namesake chain of women’s apparel stores, White House Black Market and Soma.

• KB Home /zigman2/quotes/206220859/composite KBH -2.58% reported a huge drop in housing orders because of the pandemic while turning in an earnings beat. Gross orders fell 4% in March, 59% in April, and 42% in May, as customers canceled orders due to the pandemic. Easing of shelter-in-place restrictions, however, are resulting in an uptick, the company said, noting that gross orders for the first three weeks of June are up 4% from a year ago.

• Macy’s is cutting 3,900 workers across corporate and management roles, as well as store staff, supply chain employees and the customer service network due to the impact of COVID-19. The restructuring is a cost-cutting effort as the department store retailer recovers from the pandemic. “While the reopening of our stores is going well, we do anticipate a gradual recovery of business, and we are taking action to align our cost base with our anticipated lower sales,” said CEO Jeff Gennette. “Our lower cost base combined with the approximately $4.5 billion in new financing will also make us a more stable, flexible company.” Macy’s expects to save $365 million in fiscal 2020, and $630 million on an annualized basis. Restructuring costs are expected to be $180 million. Macy’s had 123,000 workers as of February 1; many were furloughed at the end of March. Most of the remaining furloughed staff will return to work on July 5.

• MGM Resorts International /zigman2/quotes/209932643/composite MGM +1.87% will require that guests wear face masks inside public spaces at all of its U.S. outlets effective Friday, as it moves to upgrade safety measures during the pandemic. Previously, the casino operator only required employees to wear masks. The U.S. recorded a one-day total of 34,700 new confirmed COVID-19 cases on Wednesday, the highest level since late April, when the number peaked at 36,400, according to data aggregated by Johns Hopkins University. “It is clear that the coronavirus still presents a significant public health threat, and masks have proven to be one of the best ways to curtail the spread,” MGM said in a statement.

• Rite Aid Corp. /zigman2/quotes/201733831/composite RAD +5.67% reported a narrower-than-expected fiscal first-quarter loss and revenue that rose more than forecast. Retail pharmacy sales rose 6.6%, as front-end sales increased 14.2% and pharmacy sales grew 2.2%. Excluding cigarettes, front-end same-store sales increased 16.0%, amid strength in sales of cleaning products, sanitizers, wipes, paper products, liquor, over-the-counter products and summer seasonal items. The company has withdrawn its fiscal 2021 guidance issued in March, given the uncertainties about the potential impact of the pandemic.

• The Walt Disney Co. /zigman2/quotes/203410047/composite DIS +2.79% is delaying the reopening of its California theme parks, including Disneyland, which had been scheduled to start reopening July 17. “Given the time required for us to bring thousands of cast members back to work and restart our business, we have no choice but to delay the reopening of our theme parks and resort hotels until we receive approval from government officials,” Disney said. It did not give a new reopening date, but said the state of California does not plan to update its guidelines on theme parks until after July 4. “Once we have a clearer understanding of when guidelines will be released, we expect to be able to communicate a reopening date,” the company said. Disney still must negotiate with its unions before reopening, but union members have been critical of the company’s “rapid timetable” to reopen, especially considering the recent spike in coronavirus cases in Southern California.

Click to Play

Coronavirus Update: Companies’ Reopening Plans, Delegates to Stay Home

Companies from Disney to Apple are grappling with whether to reopen or close as coronavirus cases surge; the Democratic Party urges delegates to skip the summer convention; demand for a steroid has surged six-fold since the University of Oxford released positive study results. WSJ’s Jason Bellini has the latest on the pandemic. Photo: David Mcnew/AFP

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Ciara Linnane is MarketWatch's investing- and corporate-news editor. She is based in New York.

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