COVID-19 Impacts - United States

Part
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Part
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COVID-19 Impacts - United States

While there is limited information that provides insight into the recovery of the U.S. economy, specifically in the retail, travel, and financial industries, the team was able to provide insights into how the U.S. auto and tire segments of the retail industry have shown indications of recovery from the economic slowdown caused by the corona virus pandemic.

The Auto Sales Segment is Exhibiting Signs of Recovery

  • An analysis by J.D. Power hinted that the U.S. auto sales segment is showing signs of recovering from the corona virus pandemic even though it remains significantly low.
  • The report hinted that sales in April 2020 were about 50% lower than April 2019 even though the decline was not as bad as expected.
  • Speaking to CNBC, Thomas King — president of the data and analytic at J.D. Power — said that "0% financing offers, big incentives from automakers and all states now allowing at least online vehicle sales all contributed to the rebounding sales, which are up 11 percentage points from the end of March."
  • According to the report, 24 states, which constituted about 44% of retail sales in 2019, allowed dealership sales operations to remain functional while the other 26 states, which made up 56% of retail sales in 2019, allowed only remote sales following the pandemic.
  • With states easing the stay-at-home restrictions, J.D. Power opines that May would be critical in terms of sales in the auto industry.
  • Major manufactures such as Kia Motors and Mercedes-Benz announced that they would resume production in April, while Tesla and Honda Motor are expected to resume production in May.

The U.S. Tire Industry is Showing Small Signs of Recovery

  • On May 1, 2020, Sumitomo Rubber North America (SRNA) — a U.S. tire manufacturer — hinted that "the tire industry and tire dealer businesses are set to see an uptick in business" with states in the U.S. gradually reopening nonessential businesses.
  • Rick Brennan — vice president of strategic planning at SRNA — reported that compared to March 2020 when the tire replacement industry volumes for passenger tires witnessed a 19% decline, it went down 64% by April.
  • Light truck tire replacement dropped by 55% in April from 12% in March, while for medium-duty trucks, tire replacement dropped by 1% in April but was 10% up in March.
  • Brennan pointed out that the recovery of the tire industry is boosted by an uptick in miles driven with states relaxing the stay-at-home restrictions. He hinted that miles driven was down by 48% in April but was down by 41% toward the end of the month. He expects miles driven to continue to rise as states reopen businesses.
  • Matt Leeper — director of sales at SRNA — added that "compared to two weeks ago, increases have been seen across the board thanks to government support and the relaxing of shelter-in-place orders."

Additional Information

  • While the research team didn't find specific data to show the recovery of the travel industry, we found expert reports that predict that it could take "18 to 24 months before travel picks back up".
  • For the financial industry, Charles Evans — president at Chicago Federal Reserve Bank — pined that a return to economic growth should be expected from the second half of the year. "Some businesses will be able to ramp up even with social distancing and other precautions in place, Evans said, while others, including travel and hospitality services, will not. A lot will depend on how safe consumers feel to be out spending."

Research Strategy

To provide examples that can provide a measured outlook on the economy of the U.S. as it is beginning to recover from the corona virus, with a specific focus on the retail, travel, and financial industries, the research team conducted an exhaustive search through publications by consultancies and expert reports that are focused on the U.S. economy. We also scoured through media publications and industry reports for useful insights into measurable indications that the U.S. economy is gradually recovering from the pandemic but most public reports related to the general retail industry, as well as the travel and financial industries, are predictions on the recovery of these sectors but not actual data points on how they are currently recovering. However, in the course of this research, the team found useful insight, with data points, on how the auto and tire segments of the retail industry are exhibiting signs of recovery.
Part
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Part
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COVID-19 Impacts on Film and Movie Theaters - United States

Due to the COVID-19 pandemic, movie theaters have closed, resulting in Hollywood losing more than $20 billion. Many film productions were also postponed in the United States, causing 120,000 employees to lose jobs. Additionally, more consumers are streaming shows and movies during the crisis, and the theaters that are reopening have limited seatings.

Movie Theater Closures

  • Since March, the COVID-19 pandemic caused more than 100 movie theaters to close across the United States.
  • On March 17, Regal Cinemas closed all of its 543 locations in the U.S, while AMC Theaters closed all of its 630 locations nationwide.
  • AMC also temporarily suspended billings and payments for all A-List memberships.
  • Since March 20, more than 5,500 movie theaters in the U.S. closed, resulting in over 150,000 cinema employees being laid off or furloughed. AMC furloughed all of its corporate staff, including the CEO.
  • In March, it was reported that movie theater closures can result in Hollywood losing more than $20 billion. Globally, the "loss in box office revenue" was about $7 billion in mid-March, and may increase to $17 billion by the end of May.

Film Production and Distribution

  • Many large movie companies have postponed film productions and movie releases due to the COVID-19 pandemic.
  • Some companies include Universal, which postponed its production of Jurassic World: Dominion, as well as Sony Pictures, which halted the pre-production of Cinderella, and Netflix, which stopped production of Red Notice in Atlanta.
  • Some of the biggest titles that are postponed due to the coronavirus include Shazam! 2, Pixar's Soul, and Captain Marvel 2.
  • The postponement of American movie and TV productions have not only hurt the industry, but also the workforce. For example, the state of Georgia stopped the production of "five feature films and 29 series," resulting in 92,100 job losses.
  • According to the International Alliance of Theatrical Stage Employees, approximately 120,000 employees in the film industry are now out of work due to the COVID-19 pandemic.

Limited Theater Seating Capacities

  • Before theaters closed, AMC, Regal, Cineplex, Arclight and Alamo Drafthouse movie chains enforced limits on ticket sales due to the COVID-19 pandemic. On March 13, both AMC and Regal reduced the maximum seating capacity by 50 percent.
  • On April 29, North Dakota said movie theaters that reopen must have limited capacity that allows "proper spacing between groups and staggering showtimes to decrease congestion in common areas."
  • As of May 1, movie theaters were allowed to reopen in Texas as long as their capacity was limited to "25 percent of their listed occupancy."
  • On May 4, movie theaters in Missouri were allowed to reopen as long as seating was spaced out to enforce social distancing measures.
  • In the United States, about 8 percent of the 305 drive-in theaters remained open with social distancing requirements in place and cars spaced out during the COVID-19 pandemic.
  • For people who are worried of congregating, the limited theater capacity will allow moviegoers to continue practicing social distancing measures while still supporting cinemas.

On-Demand and Streaming Services

  • AMC encouraged consumers to rent or buy movies on the AMC Theatres On Demand, which has over "3,500 titles, including recent and popular titles from every major studio."
  • Seventy-five percent of Americans are streaming more shows and movies during the COVID-19 pandemic, with 73 percent preferring content from Netflix, Amazon Prime, Disney+, and Hulu.
  • Experts have said that releasing movies on demand will make up for some lost revenue, but it won't provide "for what would be a box office haul in the near term." Since it will cost about $20 to rent most of the movies, it will take millions of rentals to "reach projected box office numbers." For example, over 17 million people will need to rent the movie, Trolls World Tour, in order for the film to earn $347 million, which is what its prequel earned when it released in 4,060 theaters in 2016.
Part
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Part
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COVID-19 Impacts on TV, Music, and Live Events - United States

Covid-19 has had a major impact on music, TV and live events in the U.S. TV viewing minutes have more than doubled as compared to the same period last year, even as production on many shows has been suspended. In the music industry, more people have signed up for streaming services, but audio streaming overall has decreased. Live concerts, festivals and sporting events have come to a stand still, and it is still unclear exactly when those types of events will be held.

Music

Streaming

  • Nielsen Music and MRC Data published a report on how the Covid-19 pandemic is impacting the entertainment habits of people in the U.S. Sixty percent of people reported they are "engaging more with entertainment during this time."
  • Additionally, 24% of people reported signing up for a new streaming service, and of those people, 38% had signed up for a music service. That means a total of 9.12% Americans (0.24 x 0.38 x 100) have signed up for a new music service. Interestingly, the total audio and video streams of music was down 0.8% for the week ending March 19, and down 1.3% for the week ending March 26.
  • Although overall music streaming was down for those two weeks, the decline is entirely due to a decline in audio streaming, as video streaming actually increased by over 9% in both those weeks.
  • With 49% of respondents reporting a direct correlation between a decrease in commuting time and a decrease in time spent listening to music, the decline in audio streaming makes sense, as people would not be streaming video while driving.

Radio

  • Nielsen also explored the radio habits of Americans during the pandemic, and these were reported in the March 2020 Portable People Meter Audience report. For the month of March, which includes a significant time period after which several states had issued stay-at-home orders, AM/FM radio retained about 96% of their typical reach across all age groups.
  • The biggest loss in retention occurred in the weekday 6 AM - 10AM time slot (87% retention), and the weekday 3 PM - 7 PM time slot (88% retention). This could be explained by fewer people commuting during these times, and people sleeping later as they do not have to get up to head to work.
  • The shift in where people were listening to the radio was also seen in the Nielsen report. From January through the 2nd week in March, about 75% of radio listening happened out of home. By the week ending March 25, out of home listening accounted for only 62% of listening time.
  • Compared to the average listener, healthcare workers, police, and people that drive for a living were listening to the radio more.
  • The formats that gained share in March as compared to their February share were news/talk, classic rock, contemporary Christian, and all news stations.


Video

  • An analysis of credit/debit card spending by the New York Times found that spending on video streaming has increased by more than 30% (estimated from the graph) for the week ending April 1, 2020, as compared to the same week in 2019.
  • A study by VAB found that 83% of adults "couldn’t imagine not having a TV set right now. Seventy two percent also said that "watching TV or movies together as a family has become more common." It appears families are gathering around their TVs.
  • Americans in the 12-17 age group have increased their TV viewing time by 175% between the hours of 9 AM to 4 PM in the month of March, as compared to February.
  • For all viewers, TV viewing has increased 17% overall, but this is 39% for kids between 2 and 11, and 46% for those 12-17.
  • Streaming video viewing in the U.S. from March 23 to April 19, 2020, was 654.6 billion minutes. This was more than double the viewing minutes from the same period in 2019, 301.4 billion.
  • The series "Tiger King" has seen growth in awareness at a rate never seen before. When the series launched in mid-March, only 11% of people were aware of the series; this increased to 61% two weeks later, and reached 68% awareness in mid-April. This is greater than recent hits such as Stranger Things and The Mandalorian, and also beats out older popular series such as Duck Dynasty and Jersey Shore.
  • Many TV series/shows halted production or moved release dates due to the pandemic. This list from Deadline is extensive, but not comprehensive.


Live Events

Festivals/Concerts

  • Deadline published an extensive list of global festivals either canceled or postponed due to the pandemic.
  • It was announced in late April that the Newport Jazz and Folk festivals were both being canceled for 2020. Based on a 2018 analysis, the two events combined provide $58.1 million in economic benefits for the state, support close to 600 jobs, and pay $5 million in taxes to state and local governments.
  • Live Nation and AEG announced that all live events would be suspended through the end of March. Once states started announcing stay at home orders, this was extended due to the events not being allowed by many states. However, many states are now easing restrictions and this will likely impact the concert space. AEG has announced
  • States are handling things very differently, with Rhode Island's governor announcing that all concerts and festivals would be canceled for the summer of 2020, while Missouri's governor announced that live events could resume this week.
  • Ultimately, the state by state decisions may not be what is most important, as many artists have postponed their tours scheduled for this year. For example, BTS suspended their world tour, including 15 dates in North America; Bon Jovi canceled their 2020 summer tour; Luke Bryan pushed back his tour start date to July 10; and the Rolling Stones postponed their "No Filter Tour."
  • Consumers may have different options for getting their money back depending on if shows have been canceled or postponed.
  • If concerts are not held for the remainder of 2020, the music industry could lose almost $9 billion. Some experts are stating that large scale events, including concerts, may not resume until the fall of 2021.
  • Fifty six percent of U.S. consumers recently surveyed said that it would take them somewhere between "a few months" and "possibly never" before they go to an indoor concert venue.

Sports

  • Dr. Anthony Fauci, a leading infectious disease expert, believes that live sports will resume in the U.S. this summer, but that there will be no fans attending. With a recent survey finding that 72% of Americans said they would not be willing to attend a live sporting event until there is a vaccine for the coronavirus, it appears most fans would not want to attend anyway.
  • Fifty one percent of U.S. consumers recently surveyed said that it would take them somewhere between "a few months" and "possibly never" before they go to an indoor sports venue.
  • Major sports leagues in the U.S. are still trying to determine what their seasons will look like. The NBA is considering extending the season through September in order to finish the season.
  • The NFL has decided that all games will be played in the U.S., with no games being played in Mexico or the UK as they have been in recent years. This year's draft was held virtually, and more than 55 million people tuned in.
Part
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Part
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COVID-19 Impacts on Automotive - United States

The US automotive industry is expected to experience a drop in sales, a loss of jobs/revenue, temporary suspension of production operations, and an increased collaboration in the production of medical equipment. Due to the current COVID-19 pandemic sales of vehicles in the United States is forecast to decline by 23.9% in the near future.

Drop in Sales of Automotive

  • The current COVID-19 pandemic is predicted to lead to a drop in the sales of vehicles in the United States.
  • According to experts' prediction, the COVID-19 pandemic is expected to negatively impact the sales of vehicles in the US, from about 17.1 million in 2019 to approximately 16.8 million by 2020.
  • Statista predicts that the impacts of the pandemic on the sales of vehicles in the US could be moderate if properly managed and contained within the shortest possible time but worse-off if it persists over a long period.
  • According to Statista, the number of sold vehicles will decline to 16.4 million if the pandemic is contained within a short period and 14.5 million if it persists over a long period.
  • According to Counterpoint analysis, the current pandemic is predicted to negatively impact the sales of vehicles in the United States, resulting in a drop in sales by 23.9%.
  • The high cost of purchasing EVs (electric vehicles) is predicted to contribute to a bigger negative impact relative to the gas-powered or hybrid vehicles as consumers become more financially conservative in spending.

Lost of Jobs/Revenue

  • The current pandemic has resulted in the loss of jobs and revenue, including personal income and government taxes.
  • The United States automotive industry lost 94,000 jobs a week in the beginning of the lockdown. This figure grew to approximately 271,000 by March 24, 2020.
  • According to experts' analysis, the loss of jobs erased $7.3 billion in personal income a week in the beginning of the lockdown and $20.5 billion by March 24, 2020.
  • In terms of tax revenue, the US government lost about $2 billion within the first week of the general lockdown, this increased to $5.6 billion by the end of March.
  • During the first-quarter financial reports, some automotive industry players in the US automotive industry, including Ford and Fiat-Chrysler, have reported a loss in revenue.
  • Fiat-Chrysler, on May 5, 2020, reported a net loss of $1.86 billion and generated about $22.5 billion in revenue. The company recorded a decrease of 21% in the global shipment of its vehicles.
  • Ford, on April 28, 2020, reported a net loss of $2 billion and generated $34 billion as revenue.

Temporary Suspension of Production/Events

Collaboration Among Automotive Industry Players

Part
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COVID-19 Impacts on Travel and Hotels - United States

Covid-19's impact on the US travel and hotel industry includes current and future revenue loss, massive human toll in terms of job loss and earnings, and projected declines in future bookings and room occupancies. These and other findings are outlined below.

Revenue Loss

  • Likewise, the travel industry also suffered huge revenue loss from Covid-19.
  • Research from Oxford Economics calculate an 81% revenue decline from April to June 2020 in the travel industry.
  • Revenue loss in 2020 is expected to reach $519 billion across segments including food services, lodging and accommodation, air transport and others.

Human Toll

  • The pandemic also exacted a devastating human toll on the hotel industry with major players reporting 'significant' layoffs and employee leaves.
  • The AHLA calculated that almost 3.9 million jobs in the hotel industry have been or will be eliminated due to Covid-19 based on historical and future employment impact rates.
  • 70% of direct hotel employees have been impacted by Covid-19 and represent a loss of $2.4 billion in earnings per week.
  • California, Florida, New York and Texas are among the states with the highest job losses in the hotel industry due to Covid-19.
  • The US Travel Association also projected that 4.6 million jobs will be lost in the travel industry before May 2020.
  • Oxford Economics research also shows that the Covid-19 pandemic cost 8 million jobs in the US due to travel declines.

Booking and Occupancy Declines

  • Oxford estimates a loss of $116 billion in international tourist spending in the US for the rest of 2020.
  • This translates to an unprecedented decline of 60% in a single year, exceeding the 9/11 impact four times in the course of two years.
  • U.S. Travel President and CEO Roger Dow said, "We’re witnessing the shutdown of travel. The economic effects of that are already disastrous, but could become worse and permanent unless the government acts now."
  • Research from MMGY Travel Intelligence also reports that 6 in 10 leisure travelers have canceled vacation plans due to Covid-19.
  • Travel intent for the rest of 2020 also continue to decline.
  • 31% of surveyed travelers said they intend to take leisure vacations (from 39%) while 21% said they intend to take business trips (from 26%).
  • The report noted that US travelers' willingness to travel at home and abroad is dependent on Centers for Disease Control and Prevention's advisories as well as slowdown of Covid-19.
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Part
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COVID-19 Impacts on Finance - United States

Examples of impacts/changes in the finance industry in the United States as a result of the COVID-19 pandemic include volatility in the stock market, which fell by 30% in February, the temporary closure of bank branches, and an increase in loan defaults. Detailed information on the impacts and changes is below.

Stock Market Swings

  • According to insight from the Kellogg School of Management, COVID-19 is having an extraordinary impact on stock markets. Compared with other outbreaks that have been experienced since 1985, the pandemic has resulted in big daily U.S. stock-market moves that began on February 24, 2020. These changes have not been seen since events that occurred in the 1900s, such as the Spanish Flu of 1918–1920.
  • Kellogg School of Management states that "from February 24 to March 24, 2020, there were 22 trading days and 18 market jumps—more than any other period in history with the same number of trading days. Jump frequency during this period was 23 times the average pace since 1900."
  • Also, news and policy developments in response to COVID-19 have been responsible for "15 or 16 of the 18 stock-market jumps." Analysts say that no past infectious-disease pandemic has led to daily stock-market swings that have been witnessed in response to the COVID-19 crisis.
  • Chicago Booth Review states that the stock market fell by 30% during the first few weeks starting in February 2020.

Temporary Closure of Bank Branches

  • Following advice from public health experts for Americans to limit human interaction and observe social distancing to prevent the spread of the COVID-19 pandemic, many brick-and-mortar banks have closed or limited access to their branches.
  • According to PYMNTS, 25% of all U.S. households are either unbanked or underbanked, and may not have access to digital banking channels. Their only option is making in-branch visits and this is why some banks have modified in-person branch services and limited their customers to drive-through access only.
  • For example, Truist Financial in Charlotte, Fifth Third Bancorp in Cincinnati, KeyCorp in Cleveland, and PNC Financial Services Group in Pittsburgh have "limited access to services at many of their branches to the drive-through window." Key, Truist, PNC, and Regions Financial in Birmingham also introduced branch access by appointment only.
  • From March 19, 2020, JPMorgan Chase temporarily closed around 1,000 or 20% of its branches to ensure that its employees and customers were safe. The other 4,000 branches are operating on reduced hours. Wells Fargo, HSBC USA, TD Bank, and Charles Schwab have also closed their branches temporarily. Schwab also closed 100% of its offices until further notice.

Financial Institutions Embracing Digital Technology

  • Although financial institutions were already investing in digital technology way before the COVID-19 crisis hit, the pandemic has accelerated the move by banks to embrace digital technology and move strategies such as in-bank transactions to online banking. For example, after the COVID-19 crisis started, Capital One encouraged its customers to use the digital tools and offerings that the bank provided, such as online and mobile app services, to ensure that they were able to access their accounts 24 hours, seven days a week during the COVID-19 pandemic.
  • Banks are taking precautions against the spread of COVID-19 by changing their approaches to customer interactions to ensure that they still provide excellent customer services. Some banks have added video banking screens and upgraded their ATMs to reduce physical contact while ensuring that they meet the needs of their customers. For example, the Idaho Credit Union has implemented the new video banking technology at its branches.
  • Some financial institutions such as Consumers Credit Union based in Michigan are using interactive teller machines during the COVID-19 pandemic. The machines enable tellers to virtually meet customers during typical banking hours. Comerica Bank currently uses its Banker Connect interactive teller machines to encourage customers to finalize their bank transactions through digital channels.

Default on Loan Repayments

  • Due to the COVID-19 pandemic, some businesses in the United States have furloughed or laid-off employees. Many businesses have been forced to close during the lockdowns, resulting in losses and more layoffs. According to CNN, 30.3 million Americans or 18.6% of the US labor force has filed first-time unemployment claims since the middle part of March 2020.
  • This has led to consumers and businesses defaulting on loans. The financial markets also expect the default rate of large corporations to go up. Some lenders and creditors have filed lawsuits to try to recover past-due debts. The federal government has intervened by introducing a "six-month moratorium on the collection of defaulted student loans."
  • American banks also have customers who cannot pay bills such as credit card ones. The regulators in the United States have encouraged banks to provide relief to those that have experienced changes in their financial circumstances and are unable to service their loans.
  • According to the Foreign Policy Research Institute, although banks in the United States have sufficient capital today to cushion against the losses they will incur than they had in 2008, government support might still be needed if losses keep piling up.


Part
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Part
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COVID-19 Impacts on QSR - United States

McDonald's, Burger King, Chipotle, and KFC have all been impacted in various ways by the COVID-19 pandemic in the United States. Each brand has seen store or dining room closures, many changes in both consumer and employee-based policies, and has had to provide varying levels of financial relief. Insights regarding the impacts of COVID-19 on each company can be found below.

McDonald's

  • 75% of the McDonald's restaurants around the world are currently operational. Almost all of them have adapted to only provide drive-thru, take-out, and delivery options.
  • The company suspended their share purchasing program and has limited their spending on the Experience of the Future projects in the US.
  • While it has tried to keep restaurants open, some US McDonald's locations have had to fully close to due their locations. Examples include restaurants located inside of malls or other food courts.
  • McDonald's has suspended the Monopoly prize program until they are "confident that customers can win, claim and redeem the prizes available". Some planned prizes are no longer useful, including paid trips and cruises.
  • The company was able to source over 100 million non-medical grade face masks to distribute to their employees.
  • As of March 16, all US locations closed their dine-in services, indoor ordering kiosks, and play places.
  • They have implemented daily wellness checks at all of their company-owned locations. The checks involve taking temperatures and ensuring employees feel healthy and safe at work.

Burger King

  • Burger King's parent company, RBI, is sending $70 million in cash advances to US franchisee owners to help with finances during the pandemic.
  • RBI is also providing undisclosed cash bonuses to restaurant team members.
  • Foot traffic at Burger King dropped to its lowest point of -60% on March 21. It has remained stable, but still low since that date.
  • Burger King's daily digital orders did not drop in the month of March, remaining between 50,000 and 100,000 per day.
  • Burger King is providing up to 14 days of additional paid sick leave for employees that are diagnosed with COVID-19 or otherwise directed to quarantine.
  • Rent payments for US Burger King franchises were deferred for up to 45 days.

Chipotle

  • Chipotle has deployed contactless delivery and "tamper-evident bags" to their consumers.
  • The company has provided every employee access to 24/7 telemedicine visits via a mobile app.
  • They have also provided $9 million in cash bonuses to restaurant employees, as well as a temporary 10% raise in pay.
  • Diagnosed or otherwise affected employees will "receive pay equal to their upcoming 2-week schedule or average hours worked".
  • Due to its immediate investments in policy and design improvements during the pandemic, Chipotle's loyalty program has seen a 50% growth in members.

KFC

  • Even in areas where dining rooms are still open, KFC says that 60% of their orders are now contactless pickup or delivery.
  • The company began requiring all restaurants to perform daily temperature checks on employees in mid-April.
  • The chain donated one million pieces of fried chicken to families in need across the US.
  • KFC's parent company, Yum! Brands, has a medical relief foundation that is providing financial assistance to employees in both company-owned and franchised restaurants that have been diagnosed with COVID-19, or otherwise affected by it.
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Part
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COVID-19 Impacts on Retail - United States

Retail is among the industries that have been hit severely by COVID-19. From store closure to bankruptcy, the industry is struggling to survive. Below is a summary of key findings on the impacts of COVID-19 on retailers in the United States.

Temporary Closure

  • Due to the outbreak of COVID-19, many retailers are temporary closed. Those that are still open have adjusted their hours and imposed safety measures.
  • Some of the major retailers that have closed include but are not limited to Apple, Macy's, Nordstrom, and Gap Inc.
  • After the extension of the temporary closure of all of its stores, Gap Inc. announced that it would furlough the majority of its store employees and reduce its corporate office staff.
  • Gap Inc. employees are not the only ones affected in the retail industry. JCPenny started furloughing workers and confirmed that it would continue to furlough a "significant portion" of its 85,000 employees.
  • Under Armour announced that it would temporarily lay off about 6,700 employees.
  • It is estimated that more than 190,000 stores have been closed, accounting for nearly 50% of U.S. retail square footage.

Supply Chian and Inventory Disruption

  • According to a survey of 558 U.S. manufacturers in March, 36% are already facing supply chain disruptions.
  • The Institute of Supply Chain Management finds severe disruption in supply chain across the world by the end of March--9% in the United States, 17% in Japan and Korea, 24% in Europe and 38% in China. Due to the globalization of supply chains, disruptions in other parts of the world would also affect American companies.
  • A study by Digital Commerce 360 suggests that much of the challenges for retailers are supply chain-related. It finds that 44% expect product delays and 40% expect inventory shortages.
  • According to the National Retail Federation (NRF), 40% of its retailer members are experiencing supply chain disruptions due to COVID-19 and an additional 26% expect to see disruptions.

Financial Implication

  • The survey by Digital Commerce 360 also finds that 47% of retailers expect COVID-19 to have negative implications on their revenue and an additional 9% expect significant negative implications on their revenue.
  • Macy's has been moved from S&P 500 to S&P SmallCap 600 list after its market capitalization dropped to $1.5 billion.
  • Overall retail sales in March dropped by 8.7% seasonally adjusted from February and down 6.2% unadjusted year-over-year, the largest ever recorded as of March 2020.
  • Some non-essential retailers, however, have seen increases in digital sales, contributing to an average increase of 65% in overall revenues between March 14 and April 17. These retailers tend to fall within home goods, athletic goods, and lounge wear categories.

Bankruptcy and Credit Downgrade

  • As of early April, Fitch has downgraded credit ratings for nine major retailers: Capri Holdings (Michael Kors, Versace, Jimmy Choo), Dillard’s, J.C. Penney, Kohl’s, Levi Strauss, Macy’s, Nordstrom, Signet (Kay Jewelers, Zales, Jared, Piercing Pagoda) and Tapestry (Coach, Kate Spade, Stuart Weitzman).
  • J Crew Group Inc. is the first major retailer to file for bankruptcy. According to analysts, JCPenney, Neiman Marcus and J Crew were distressed even prior to COVID-19 due to crushing debt loads.
  • With $1.6 billion worth of debt, J Crew was planning on spinning off its fast-growing denim brand to help pay for a big chunk of its debt. That plan was, of course, crushed by the outbreak of COVID-19.
  • Saks Fifth Avenue is reportedly preparing to file for bankruptcy after failing to pay interest-only debts of around $3.2 million.
  • With $4.3 billion worth of debt, Neiman Marcus is also reported to be considering bankruptcy.


Sources
Sources

From Part 02
From Part 03
From Part 08