The stock market’s longest bull run in history ended on February 27, 2020 with the Dow Jones Industrial Average (INDEXDJX: .DJI) losing nearly 1,200 points as the result of the highly contagious pathogen COVID-19. With people being forced to stay at home, companies like Netflix (NASDAQ: NFLX), Domino’s (NYSE: DPZ), and Zoom (NASDAQ: ZM) thrived. However, we present you with three companies that suffered and may be in even more trouble in the near future.
Macy’s (NYSE: M), founded in 1858, is an American institution and popular tourist destination in New York City. Even before the outbreak, Macy’s announced that it would close 20% of its stores and its stock has fallen over 85% in the last five years. Once the pandemic kicked into full gear, the company temporarily closed all its stores, furloughed a majority of its 130,000 employees, and CEO Jeff Gennette discontinued his own salary.
Macy’s had restructuring plans to boost profits, but earlier this year, the S&P 500 (NYSEARCA: VOO) booted the company because its credit rating was demoted to junk, making it ineligible for government stimulus assistance. Macy’s has partnered with Lazard (NYSE: LAZ) to investigate financing options and is offering free shipping on orders over $25 and 30% discounts on a lot of its products to bolster sales at a time when apparel is taking a back seat to essentials and groceries. Macy’s is also taking a back seat to e-commerce titan Amazon (NASDAQ: AMZN), making roughly 1% of all U.S. e-commerce sales versus Amazon’s 49%.
Macy’s has other competitors in off-price retailers like Ross (NASDAQ: ROST) and TJ Maxx (NYSE: TJX). The company has suspended dividend payments, tapped its $1.5 billion credit line and withdrawn its sales and earnings outlook for 2020. With troubled financials before the outbreak and strong competition awaiting after, Macy’s will likely struggle to survive, let alone regain its former glory.
2. Alaska Airlines
Bradley Tilden of Alaska Air Group (NYSE: ALK) is another CEO that has suspended his salary amidst the pandemic, with his company slashing 80% of its flight schedule and discontinuing its dividend. For the consumer, Alaska Air eased change and cancellation restrictions and extended its elite earned-mileage program. Aside from hardware, an airline’s main assets are pilots and flight attendants and Alaska Air has accepted nearly $1 billion (with $267 in the form of a ten-year loan) from the government to cover employee pay.
Prior to the coronavirus outbreak, Alaska Airlines was doing pretty well, scoring high marks for its loyalty program and its ‘employee-empowered’ customer service, as well as scoring second place in the nation in a Wall Street Journal ranking of the best airlines. The company also expanded its routes after acquiring Virgin America in 2016 for nearly $4 billion, and holds fifth place in the U.S. for domestic market share at 6.4%. Alaska Airlines owns over 100 of its own airplanes and as a result was able to secure loans and expects a surge in demand after people are allowed to leave their homes. It’s still too early to tell whether the company will survive the pandemic or perhaps be acquired by a bigger airline.
Greater China accounted for 31% of IMAX’s (NYSE: IMAX) 2019 revenue, earning a record $366 million in box office receipts, and represents 48% of the company’s future theater installations backlog. With the country being ground zero of the pandemic, IMAX took a hit as all theaters were shuttered and all titles were postponed for later release dates. China is expected to have all its theaters operational by July with strict guidelines like skipping seats and rows to still enforce some social distancing.
IMAX was doing just fine before the outbreak, beating analyst estimates for Q4 of 2019 for both revenue and EPS. IMAX has enough cash to last at least eleven months and credit lines that could sustain it for years to come. The company’s CEO, Rich Gelfond, remains optimistic about IMAX, anticipating a huge return to business once people are released from months of confinement and the huge slate of anticipated blockbusters due to be released in the coming months and next year.
Below is an outline of past performance and impact of COVID-19 on the three stocks:
|Ticker||Revenue Since 2009(%)||Price Since Start of Year(%)|
My prediction is that Alaska Air and IMAX will survive the pandemic, however I’m not optimistic about Macy’s as it has a lot of obstacles to overcome.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Contributing Writer at MyWallSt
David fell in love with the stock market in 2000 after making $30,000 overnight on Techniclone. His favorite stocks today are Netflix, Google, Amazon, and Apple as they are the market leaders in their sectors and are safe long-term investments.