The recession and bankruptcies are making the headlines, and it is widely accepted that the Covid-19 crisis will leave scars on companies. However, many businesses are actually benefiting, and it is not just the Work-From-Home usual suspects. We listed some below:
- Real estate opportunities for fast-growing retailers: with many retailers shrinking their operations if not going bankrupt, their strongest competitors will have plenty of inexpensive real estate opportunities to keep growing their store base.
- Unsold inventories for off-price retailers: the likes of TJX and Burlington Stores typically buy unsold inventories from department stores, other retailers or their suppliers. We trust that their purchase managers are getting even bigger discounts than usual at the moment.
- Low rates for borrowers: the Federal Reserve’s proactive stance offered indebted companies an unexpected opportunity to cut their interest expenses and lock them for the long-term.
- M&A for investment bankers: many companies that issued debt during the crisis are investment grade, did not necessarily need cash, and now sit on a war chest. They are in a very strong position to make cheap acquisitions, and several banks noted a significant rise in expressions of interest for M&A.
- Accelerated technology transition for some…: the crisis also forced corporations to re-think their business model. Restaurants which did not offer take-away had to develop it, retailers who were only thinking about omni-channel had to accelerate adoption, … and customers realized that curbside pick-up could be more convenient than home delivery (thus contributing to save costs for the store).
- … and smooth shift to pre-existing plans for others: some companies, which were already preparing a change in their operating model for other reasons, took advantage of the reduced activity during the crisis to implement a smooth transition.
So, YES, some businesses are benefiting from the crisis and believe us, US companies, which are pragmatic and flexible, are not going to miss the opportunity. Admittedly, these factors have already been partly reflected in recent price movements, but we are talking about events with long-term effects.
Anne-Laure Fantuzzi – June 23, 2020