A Blog by Jonathan Low


Feb 9, 2021

Why Slow, Uneven Rollout of Covid Shots Causing Changed Business Plans

The uneven distribution of Covid vaccine shots, the rise of new variants and some public resistance to inoculation is causing businesses to revise their projections about economic rebound. 

While the development of the vaccines has been miraculous, the recognition that global distribution could take two to three years suggests that prudent estimations of growth be conservative. JL

Sarah Krouse reports in the Wall Street Journal:

Consumers are unlikely to resume travel, dining out and shopping in stores at a pre-pandemic cadence until later this year, chiefs of some large companies told Wall Street analysts in recent weeks. “Optimism that initial distribution of vaccines would lead to a restoration in global travel have been dashed in the face of new outbreaks and new mutations of the disease.” The pandemic has unevenly bolstered growth prospects; divided workforces and reshaped consumer purchasing. "Progress on economic growth is contingent on an effective vaccine rollout program globally,”

The slow start of the Covid-19 vaccine rollout, along with the arrival of new virus variants, has dashed some business leaders’ hopes for getting back to normal in 2021.

Consumers are unlikely to resume travel, dining out and shopping in stores at a pre-pandemic cadence until later this year, chiefs of some large companies told Wall Street analysts and investors in recent weeks. Some CEOs said consumer activity could pick up as soon as spring. Others pointed to a recovery later in the year—or even 2022.

“Let me underscore that progress on economic growth is contingent on an effective vaccine rollout program globally,” said Goldman Sachs Group Inc. CEO David Solomon. “In its absence, economic recovery will be unnecessarily delayed.”

The pandemic has unevenly bolstered and derailed growth prospects; divided workforces into staff able to shelter at home and those who must report in person for duty; and reshaped consumer purchasing as stay-at-home orders change. The rapid shifts have complicated financial forecasts and made consumer behavior hard to predict.

John Idol, CEO of Capri Holdings Ltd., which owns Versace and Michael Kors, said online luxury spending is strong but the near-term outlook is challenged because jumps in Covid-19 cases have caused additional restrictions and temporary store closures.

As for tourism, which drives much of luxury sales, Mr. Idol isn’t expecting crowds of traveling shoppers back in his brands’ stores until May 2022. “We don’t think that the vaccine is fully distributed in enough of a broad-based way to create comfortable cross-border traffic well into next year,” he said.

The airline industry’s trade group cautioned that a recovery could be smaller than expected in 2021 after demand plunged by roughly two-thirds in 2020. Bookings in January 2021 were down 70% from a year ago.

“Optimism that the arrival and initial distribution of vaccines would lead to a prompt and orderly restoration in global air travel have been dashed in the face of new outbreaks and new mutations of the disease,” said Alexandre de Juniac, CEO of the International Air Transport Association. “The world is more locked down today than at virtually any point in the past 12 months.”

Bernard Looney, chief executive of BP PLC, said the pandemic would likely continue to weigh on the oil-and-gas giant early this year and that the degree to which energy demand recovers will depend in part on vaccine rollouts and efficacy.

About 8.7% of the U.S. population had received one dose of a Covid-19 vaccine as of Feb. 6 and the path to herd immunity is long.

Infectious-disease specialists estimate that stopping the spread of Covid-19 and its mutations would require more than 70% of the population to develop immunity. A Census Bureau survey of 68,000 adults in the U.S. conducted Jan. 6-18 found that only about half of unvaccinated adults said they would definitely get the vaccine.

Corporate profits have rebounded quickly from the pandemic’s initial shocks, and investors have pushed major market averages to new highs on optimism about the year ahead. After dropping an estimated 12.5% in 2020, profits at S&P 500 companies are forecast to jump 23.6% this year, according to data from Refinitiv.

More than 120 U.S. CEOs surveyed by nonpartisan think tank The Conference Board between early November and early December said Covid-19 was their top concern and potential business disrupter in 2021. After that, they said vaccine availability could have the greatest impact on their businesses.

Rick Gates, senior vice president of pharmacy and health care at Walgreens Boots Alliance Inc., said in an interview the company expects a return to normalcy as the vaccine is distributed, but much will depend on how long immunity lasts. The company worries that Covid-19 could turn out to be a more permanent fixture of life, a serious and deadly flulike illness that will require annual vaccines, he said.

Problems with vaccine distribution in other countries could also derail U.S. businesses. Canada, which doesn’t manufacture its own Covid-19 vaccine, recently extended its ban on large cruise ships for another year, until Feb. 28, 2022. Carnival Corp. and other operators have canceled their sailings through April 30 but talked about restarting U.S. voyages this year.

Arnold Donald, Carnival’s CEO, said in January that the company is working to return all its ships to service by the end of 2021, thanks to the development of low-cost testing and new therapeutics. “The pace of the distribution of vaccines will certainly influence the pace of our recovery,” he said.

While the early months of 2021 are likely to be challenging in terms of continued lockdowns and restrictions, many executives said they are hopeful that by spring, enough people will be vaccinated that consumer confidence will grow.

T-Mobile US Inc. Chief Mike Sievert said he thinks it is wrong to assume the U.S. rollout won’t speed up. “I think we’re going to see widespread vaccination by the middle of the year,” he said. Broader vaccination could benefit his company by leading to greater consumer activity and more switching from rival carriers, he said.

Some business-sentiment trackers suggest leaders are optimistic. Corporate sentiment among S&P 500 companies that have reported results to date surged to an all-time high from a recent low three quarters ago, a Bank of America predictive analytics report found. The analysis assigns sentiment scores to earnings-call transcripts.

Delta Air Lines Inc. Chief Ed Bastian said he expects an inflection point this spring as vaccine distribution continues, consumer confidence grows and travel restrictions lift. Other executives echoed that view, telling investors that as more people get vaccinated they will venture out on summer travel.

Stephen Cooper, chief executive of Warner Music Group Corp., told analysts that as the company awaits clarity on the efficacy of vaccines on new strains, it will continue to push live streaming over in-person concerts. He said the music company was hopeful that live shows can resume “sooner as opposed to later.”


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