Square, Alliance Data Feel Merchants’ Covid-19 Pain

Merchant processor and business-software provider Square Inc. says some of its sellers have seen declines of 45% in payment volume in recent days, and private-label and cobranded card issuer Alliance Data Systems Corp. says business at its client merchants is softening. 

Both companies held conference calls with analysts after the markets closed Tuesday to report how the novel coronavirus, or Covid-19, pandemic is affecting their business. Amrita Ahuja, chief financial officer of San Francisco-based Square, said gross payment volume in its portfolio of sellers, what Square calls merchants, was in line with management expectations in early March, but since then has decelerated sharply.

“Gross payment volume over a trailing 10-day period has been 25% lower than this period last year, with even greater declines in recent days,” she said on Square’s call. 

As has been widely reported, restaurants—which are now closed in many cities and states except for take-out and drive-through orders—bars, and brick-and-mortar retailers are taking the worst hits. Payment volume for Square’s sellers in the services sector are holding up better, according to Ahuja. 

The biggest drops for Square have occurred in big cities where authorities have closed schools and imposed policies to keep people at home. “We are seeing a more pronounced impact in markets like New York, San Francisco, and Seattle, where the declines have been about 45% or more year-over-year in the last few days, and these are the markets where self-quarantine or shelter-at-home measures are in place,” Ahuja said. 

Outside the top 11 metropolitan areas, the drop-offs have been about 20%, but Ahuja expects rates of decline to converge as more places impose stay-at-home policies.

In contrast to point-of-sale payments, both Square and Alliance Data said e-commerce volumes have been strong. “Although our private-label business has significantly softened, we have seen a shift to online,” Ralph Andretta, chief executive of Columbus, Ohio-based Alliance Data, told analysts. “For the first week of March online sales were 32% of total brand partner sales, and this increased to 46% for this past week.”

Alliance Data is one of the nation’s leading store card issuers; clients include Victoria’s Secret, Bath & Body Works, Pink, J. Crew, and Pottery Barn.

Square saw online volumes increase in part through more curbside pick-up orders, according to CEO Jack Dorsey. He also said Square, which announced reduced financial expectations, is doing what it can to ease sellers’ cash-flow and related problems. Measures include offering users of its Square Capital funding service delays in minimum payments. “The biggest problem sellers are facing right now are around shifting to no-contact commerce, and managing cash flow,” Dorsey said.

Square’s fate isn’t tied solely to that of its merchants. Its popular consumer-facing Cash App, which provides person-to-person payments and other services, booked a “record number” of new users last week, Dorsey said.