The slow start of the launch of the Covid-19 vaccine, along with the arrival of new variants of the virus, dashed the hopes of some business leaders to return to normal in 2021.
Consumers are unlikely to return to travel, dine out and shop in stores at a pre-pandemic pace until the end of this year, chiefs of some large companies told Wall Street analysts and investors in recent weeks. Some CEOs said that consumer activity could increase as early as spring. Others pointed to a recovery at the end of the year – or even in 2022.
“Let me point out that progress in economic growth depends on an effective vaccine deployment program worldwide,” said David Solomon, CEO of Goldman Sachs Group Inc .. “In its absence, economic recovery will be unnecessarily delayed. “
The pandemic has unevenly reinforced and damaged growth prospects; divided the workforce into personnel capable of sheltering at home and those who must report personally to the service; and reshaped consumer purchases as requests to stay at home changed. Rapid changes have complicated financial forecasts and made consumer behavior difficult to predict.
Consumers are unlikely to return to eating and shopping at pre-pandemic levels by the end of this year, say some CEOs.
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Gene J. Puskar / Associated Press
John Idol, CEO of Capri Holdings Ltd., owner of Versace and Michael Kors, said that spending on luxury online is strong, but short-term prospects are challenged because the leaps in Covid-19 cases have caused additional restrictions and temporary closings of stores.
As for tourism, which drives a large part of luxury sales, Mr. Idol does not expect crowds of shoppers to travel back to his brand stores until May 2022. “We do not think that the vaccine is fully distributed in a wide space. based on creating comfortable cross-border traffic next year, ”he said.
The aviation industry trade group warned that the recovery may be less than expected in 2021, after demand fell by about two-thirds in 2020. Reserves in January 2021 fell 70% from the previous year.
“The optimism that the initial arrival and distribution of vaccines would lead to a rapid and orderly restoration in global air travel has been destroyed 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 closed today than virtually any time in the past 12 months.”
Bernard Looney, chief executive of BP PLC, said the pandemic is likely to continue to weigh on the oil and gas giant earlier this year and that the degree of recovery in energy demand will depend in part on the launch and effectiveness of vaccines.
About 8.7% of the US population received a dose of the Covid-19 vaccine on February 6 and the road to collective immunity is long.
Infectious disease experts 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 United States, conducted from January 6 to 18, found that only about half of unvaccinated adults said they would definitely receive the vaccine.
Corporate profits recovered quickly from the initial shocks of the pandemic, and investors took the main market averages to new highs with optimism about next year. After falling about 12.5% in 2020, profits for S&P 500 companies are expected to increase 23.6% this year, according to data from Refinitiv.
More than 120 US CEOs interviewed by the Conference Board non-partisan think tank between early November and early December said Covid-19 was their primary concern and potentially disruptive business in 2021. After that, they said that Vaccine availability could have the greatest impact on your business.
Rick Gates, senior vice president of pharmacy and health at Walgreens Boots Alliance Inc., said in an interview that the company expects a return to normal when the vaccine is distributed, but much will depend on how long the immunity lasts. The company fears that Covid-19 could become a more permanent fixture in life, a serious and deadly flu-like illness that will require annual vaccines, he said.
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Problems with the distribution of vaccines in other countries can also hurt US business. Canada, which does not manufacture its own Covid-19 vaccine, recently extended its ban on large cruise ships for another year, until February 28, 2022. Carnival Corp.
and other operators canceled their travels until April 30, but spoke of restarting travel in the United States this year.
Arnold Donald, CEO of Carnival, said in January that the company is working to return all of its ships to service by the end of 2021, thanks to the development of low-cost tests and new therapies. “The pace of 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 blockages and restrictions, many executives said they hope that enough people will be vaccinated in the spring to boost consumer confidence.
T-Mobile US Inc. chief Mike Sievert said he thinks it is wrong to assume that the launch in the United States will not be accelerated. “I think we will see widespread vaccination by the middle of the year,” he said. The broader vaccination could benefit your company, leading to increased consumer activity and more changes from rival carriers, he said.
Some corporate sentiment trackers suggest that leaders are optimistic. Corporate sentiment among S&P 500 companies that have reported results so far has soared to a record high since a recent low three quarters ago, a Bank of America predictive analysis report concluded. The analysis assigns sentiment scores to the transcripts of the earnings calls.
Delta Air Lines Inc. chief Ed Bastian said he expects an inflection point this semester, as vaccine distribution continues, consumer confidence grows and travel restrictions increase. Other executives agreed with this view, telling investors that the more people who get vaccinated, the more adventurous they will be on summer travel.
Stephen Cooper, chief executive of Warner Music Group Corp., told analysts that while the company awaits clarity about the effectiveness of vaccines in new strains, it will continue to promote the live broadcast of live shows. He said the record company was hopeful that the live shows could be resumed “sooner rather than later”.
—Sharon Terlep and Suzanne Kapner contributed to this article.
Write to Sarah Krouse at [email protected]
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