The unforeseen events of the beginning of 2020 have us readjusting our lives in so many ways. We have children that go to class without leaving their bedrooms. We have a brand new level of tension when we grocery shop. We have an uncertainty about the near future that is unprecedented. ”Will my college student have an actual dorm room in the fall? Will I have family come from out of town to the house for Thanksgiving dinner this year?” are some of the questions that we may be asking ourselves lately. Well, COVID-19 has also changed the way that we will purchase goods, travel and manage our money. This is because there are brands that we have come to rely on that will likely no longer be in existence. Will we survive as consumers during this volatile period? Of course we will! We like ‘stuff’. It is the American Way. But let’s take a look at some corporate entities that we will probably just have to get used to living without.
- GNC – We humans have evolved and we have acquired enough knowledge to know that there are things available in nature and at the mall that can help us be more healthy. Our “go-to” has been GNC. The company posted a net loss of $200 million during the first quarter, compared with a loss of $15 million during the same three months last year. Though GNC’s financial concerns did not begin with the virus, the retailer has been hit hard by the COVID-19 pandemic. Their survival will take more than fish oil capsules or testosterone tablets.
- Neiman Marcus – In retail, we have a handful of staples that we can count on to help us dress well without diving into the realm of specialty shops. If we want boilerplate, upper end fashion then Neiman Marcus is one of those staples. But the market for “fashion staple retailers” is not immune to this virus. The company entered Chapter 11 restructuring proceedings in the U.S. Bankruptcy Court for the Southern District of Texas. While executives state that they will not be liquidating and will re emerge from bankruptcy better than ever…They have filed for bankruptcy. Looks like ‘Last Call’ to us.
- JetBlue – People love JetBlue. The airline routinely receives high customer satisfaction awards and, because it operates out of the northeast (the nation’s most traveled section by air), it has millions of devoted customers. The problem is that JetBlue is flying around 100 flights a day, or about 10% of its originally planned schedule and, while they have received $1B from the Cares Act to operate through September, 2020, leisure traveler demand isn’t expected to rebound enough for the carrier to survive past then at the 10% clip. Expect the JetBlue badge to be swallowed by one of the legacy carriers (Delta, United and American) as their pockets don’t seem to be quite deep enough to survive the rapid descent of vacation travelers created by coronavirus fueled apprehension.
- Sears/Kmart – You may wonder, “Wait! Aren’t Sears and Kmart already toast?” Well you are about 60% right. Transformco, which acquired Sears and Kmart out of bankruptcy in February 2019, said in a November statement that after closing 100 stores last year, it will operate 182 stores in total. Well this statement was made before coronavirus. An entity that has struggled as famously as this one has for the past five years is a no brainer to be on our list of vanishing brands. Expect those 182 stores that have been shuttered for the past couple of months to remain shuttered indefinitely.
- Macy’s – Long admired and American household name, Macy’s, is in trouble like never before. Investors are scrambling to dump their association with the retailer as many of their stores are expected to never reopen after the “Stay at Home” orders are lifted. Macy’s is not out of cash but it is out of credit and the cash will probably only last until the early part of 2021. We feel that is optimistic, however, because it is never comforting for bondholders when the Chief Financial Officer of a company in distress suddenly departs. On April 7, Macy’s announced that CFO Paula Price would “voluntarily depart,” effective May 31. This leaves us to wonder if this year’s Macy’s Thanksgiving Day Parade will instead be the “Amazon Holiday Procession”.
The landscape of familiar companies that we have grown accustomed to spending our money with is changing. Drastically and at breakneck speed. So how will we adjust? Is this really the end of the brick and mortar shopping experience? Will there eventually only be one airline that is government owned? We can only intelligently answer the first of these questions. “How will we adjust?” The answer is “We will adjust just fine.” Just ask Amazon, Walmart and Kroger which have all just posted record profits. For the time being, these brands aren’t going anywhere anytime soon. American enterprise has always shown a resilience that is fueled by the basic supply and demand doctrine. If there is a demand? There will be a company that will offer us the supply. And they will happily do so.
So we will adjust. We will adjust just fine. Because we like ‘stuff’. Companies like providing ‘stuff’ and making a profit from it. We may not be able to get it from Macy’s but we will get it.
And there WILL be a parade even if it is brought to us by Zoom. It is the American Way.
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