America's top three department-store operators have jumped into action to mitigate a working-capital crunch, as sales dry up from the COVID-19 pandemic.

Macy's closed all of its stores because of the COVID-19 pandemic. While it's continuing to sell merchandise online, e-commerce typically represents only a quarter of Macy's business. Moreover, online sales of apparel and footwear have plunged this month as consumers focus on buying essentials. That means very little cash is coming in the door. Meanwhile, Macy's still has to satisfy its payables obligations. This abrupt negative shift in Macy's working capital position could create a multibillion-dollar cash flow headwind over the next several months. Kohl's and Nordstrom face similar (albeit somewhat smaller) threats.

Department stores are taking a multipronged approach toward shoring up their cash positions. Macy's and Nordstrom both confirmed that they will temporarily stop paying dividends. Meanwhile, Kohl's and Nordstrom have paused their share repurchase programs. (Macy's hasn't bought back stock for several years.) Kohl's also said it is evaluating its dividend and may temporarily reduce or suspend it.

Macy's, Kohl's, and Nordstrom have drawn on their credit facilities to give themselves bigger cash cushions, borrowing $1.5 billion, $1 billion, and $800 million, respectively.

Also, all three retailers have slashed their spending plans for the year. For example, Nordstrom said it is "targeting further reductions of more than $500 million in operating expenses, capital expenditures and working capital." Kohl's and Macy's have outlined similar initiatives. These plans include offering bigger discounts to speed up sales of seasonal merchandise online. Macy's said that it is cutting future merchandise orders and extending payment terms. In other words, it is buying time to convert its current inventory into cash and working to prevent a future buildup of excess inventory.

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Department Stores Suspend Dividends and Conserve Cash As Coronavirus Crushes Sales