The following is a global overview of what is going on with businesses financially and where the trends are leading.
20 Percent of German Companies Doubt Their Survival. More than one in every five German businesses believe they may not survive the effects of the global economic shutdown, according to a June survey by Germany’s ifo Institute.
Travel agencies and tour operators are most precarious, with 85 percent doubtful they can continue. Three-quarters of German hotels and 67 percent of restaurants are unsure of their survival, as are 55 percent of enterprises in the arts and entertainment.
In manufacturing, 53 percent of metal processing companies see a dark future, as do 38 percent of textile manufacturers, 28 percent of printing companies, and 26 percent of companies in vehicle-related industries.
Among retailers, 21 percent have difficulty seeing a path forward.
Major U.S. Restaurant Chain Files Bankruptcy. NPC International, which operates 1,200 Pizza Hut and 400 Wendy’s restaurants, has filed Chapter 11 bankruptcy, siting the economic shutdown, rising food and labor costs, weak sales, and its nearly $1 billion in debt.
The company, which employs about 40,000 people in 27 states, is expected to sell or close some of its restaurants as it works through bankruptcy.
U.K. Axes Jobs As Government Support Fades. British retail icon Harrods will turf out up to 700 workers, John Lewis & Partners will close some of its four dozen stores across Britain, and Philip Green’s Arcadia Group will lop 500 administrative jobs.
SSP Group, which operates fast-food eateries in airports and train terminals, is axing half its U.K. workforce, about 4,500 people. Fewer than 10 of its 570 outlets in Britain are still open.
The companies’ executives called further layoffs “inevitable” as the government ends its £9-billion payroll support program.
Even the Royal Mail, Britain’s postal system, is letting go of 2,000 workers.
Large companies in every major sector of Britain’s economy say they are more likely to cut jobs than expand payrolls in the current quarter, according to a survey by Manpower Group.
Disney Delays Parks Reopening. As we have been reporting, it was unlikely that Disney parks would be back in business considering all of the new regulations and restrictions. Last week, the Disney Co. postponed indefinitely the reopening of its Disneyland theme park in California, due to the rising tide of COVID infections in that state.
As of this writing, Disney’s Florida parks were still scheduled to begin reopening on 11 July. That also may be put off because the virus is spreading more quickly now in that state as well.
Again, in the perfect disconnect between Wall Street and Main Street, Disney stock prices rose 48 percent from its March low through mid-June. But the “virus surge” in CA and FL set the share price back 6 percent over five consecutive days later last month.
Disney’s Shanghai theme park reopened in June to 30 percent of capacity but the parks need 60 percent capacity to break even, analysts calculate.
Among people who abide by social distancing, two-thirds would consider visiting a Disney park only when a COVID vaccine is available, according to a June UBS survey of 2,000 U.S. consumers.
TRENDPOST: As we keep noting, once a vaccine is invented, despite its effectiveness, the fearful majority will feel more at ease and government imposed restrictions will be eased.
TRENDPOST: To date, in California, with 40 million people, there have been 6,457 coronavirus deaths or 0.0161 percent of the population.
As for the spike in virus cases that has Disney officials concerned, 15 deaths were attributed to the virus yesterday, or 0.000037 percent of the population.
Yet, despite this insignificant number, the state has re-locked down many businesses and imposed new virus rules to follow.
AMC Delays Theater Reopenings. AMC Entertainment Holdings, the world’s largest move theater chain, has moved back the date of its’ theaters’ reopening from 15 July to 30 July.
The move came after Warner Brothers reset to 12 August the opening of its “Tenet” big-screen thriller, and Disney postponed until 21 August the release of its “Mulan” remake.
AMC will open 450 of its 661 U.S. theaters on 30 July and another 150 within a week after that. It expects to reopen some theaters in all 14 countries in which it operates by the end of this month.
McDonald’s Suspends Dining Room Reopenings. With the COVID virus resurging across the country, McDonald’s has ordered franchisees not to reopen their dining rooms until at least 23 July unless local governments already have allowed them to.
About 2,200 of the burger chain’s approximately 14,000 U.S. shops now allow customers to dine in.
Private Equity Firms Let Their Companies Go Bust. Private equity firms, collectively sitting on an estimated $1.45 trillion in cash, have let companies in which they own large stakes go bankrupt during the economic shutdown.
In the U.S., 34 such companies filed for bankruptcy from March through June, including Hertz Global Holdings, Neiman Marcus Group, and J. Crew Group.
For example, private equity firm Ares Management Corp., which bought Neiman Marcus in 2013 in partnership with the Canada Pension Plan Investment Board, held $33 billion in cash when the upscale retail chain went bust in May.
Structural problems sometimes prevent the funds from coming to the rescue of their troubled holdings, experts say.
Often, the cash the equity firms have in hand is from new investors and, by contract, can only be used for new investments, not to sustain previous ones.
Also, equity firms are obligated to use investors’ dollars to make the most profitable investments, not to try to rescue companies circling the drain.
However, many private equity companies have “crossover funds” that allow new dollars to be added to older investments. But equity funds having that flexibility typically have chosen not to use it during the current crisis and, instead, have made a calculation that it is more profitable to let the companies go bankrupt than risk additional dollars, even if that damages the portfolios of the funds’ earlier investors.
Credit Card Ditching. Premium credit cards that offer extra points on airfare, hotels, and other high-ticket purchases, but charge hundreds of dollars in annual fees, are losing their charm for consumers.
Travel bans and work-from-home wardrobes make it harder to justify the cards’ hefty fees.
Banks have carefully cultivated these big spenders and, as millions of people delay mortgage and credit card payments, banks need more than ever to keep collecting those annual fees and the interest that balances on those cards carry.
That may be hard to do. Credit card spending overall was down 21 percent in May from a year earlier, according to Visa Inc. Charges for airfares and hotels sank by 70 percent. But charges rose for groceries and drugstore spending.
Also, some customers are switching their purchases to cards offering cash back.
To keep consumers loyal, Citigroup is larding extra points onto its Prestige card for a range of everyday purchases. JPMorgan Chase is adding extra points for grocery purchases made on its Sapphire Reserve card. American Express is offering credits of up to $320 for certain purchases.
Rates for Bigs, High Rates for Smalls. While Americans sink deeper in debt, not only does the government pass laws and make deals that favor the rich, the Banksters borrow money for nearly free while they hit consumers with sky-high borrowing costs.
Like the rest of the Washington club members, banks have an ally in keeping up their profits. The U.S. Federal Reserve is lending big banks money at dirt-cheap rates as part of the central bank’s bailout project while the banks keep credit-card interest rates largely unchanged.
Citibank is an example.
It pays the Fed 0.35 percent interest for the Fed’s money that it loans under the Paycheck Protection Program and other Fed programs. Instead of using the profits or fees from those loans to lower credit card interest rates, Citibank uses the Fed’s cheap money to cushion its profits, continuing to charge consumers interest and penalties as high as 27.4 percent.
Citibank also earned 452 complaints made to the Consumer Financial Protection Bureau in June, according to data compiled by Wall Street on Parade.
The complaints include an instance in which a person made three payments in one month to reduce a high credit card balance, then found her card temporarily “locked” – apparently as punishment for bringing her balance down too quickly.
Car Sales in China Plummet. Sales of new cars in China fell 37 percent during the last week of June, compared to a year earlier, according to the China Passenger Car Association (CPCA).
Average daily sales were 6 percent lower than the last week of May; sales in June’s first week were 20 percent below those of the same week in May, a month in which sales showed a 20-percent increase year-on-year.
The CPCA attributed the plunge to unspecified “seasonal factors.” It also noted that the comparison suffers because June 2019 was a particularly strong month for China’s car sales.
Despite dealers offering a buffet of discounts and other enticements for customers, the China Association of Automobile Manufacturers predicts 2020’s sales to fall 15 to 25 percent below those of 2019.
TREND FORECAST: As we have precisely forecast, there will be sharp economic peaks and valleys as the global economy declines into the “Greatest Depression.” Mainstream media will label it an economic recovery when numbers in various sectors spike higher.
