The slow launch of the Covid-19 vaccine, along with the arrival of new variants of the virus, has shattered hopes of some business leaders to return to normal in 2021.
Consumers are unlikely to resume travel, meals and shopping in stores with a pre-pandemic rate until later this year, the heads of large companies told Wall Street analysts and investors in recent weeks. Some CEOs said consumer activity could resume immediately after spring. Others indicated a recovery later in the year – or even in 2022.
“Let me emphasize that progress in economic growth depends on an effective vaccine launch program globally,” said David Solomon, CEO of Goldman Sachs Group Inc. “In his absence, the economic recovery will be unnecessarily delayed.”
The pandemic has unevenly sustained and derailed growth prospects; the division of labor into staff able to take shelter at home and those who have to report for duty; and reshaped consumer purchases as home orders changed. Rapid changes have complicated financial forecasts and have made consumer behavior difficult to predict.
Consumers are unlikely to resume mass and shopping at pre-pandemic levels until later this year, some CEOs say.
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Gene J. Puskar / Associated Press
John Idol, CEO of Capri Holdings Ltd., which owns Versace and Michael Kors, said online luxury spending is strong, but the short-term outlook is disputed as jumps in the Covid-19 case have led to further restrictions and the temporary closure of stores.
When it comes to tourism, which accounts for a large share of luxury sales, Mr. Idol does not expect a lot of shoppers to travel to his brand stores until May 2022. “We do not believe that the vaccine is fully distributed in a way based on to create comfortable cross-border traffic by next year, ”he said.
The airline trading group warned that a recovery could be lower than expected in 2021, after demand fell by about two-thirds in 2020. Bookings in January 2021 fell by 70% from a year ago.
“The optimism that the arrival and initial distribution of vaccines would lead to a prompt and orderly restoration of global air travel has been destroyed in the face of new outbreaks and new mutations in the disease,” said Alexandre de Juniac, CEO of the International Air Transport Association. “The world is more blocked today than at almost any time in the last 12 months.”
Bernard Looney, executive director of BP PLC, said the pandemic will continue to weigh on the oil and gas giant earlier this year and that the degree to which energy demand is recovering will depend in part on the launch of vaccines and effectiveness.
About 8.7% of the US population has received a dose of Covid-19 vaccine since February 6, and the road to herd 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 survey conducted by the U.S. Census Bureau on 68,000 adults, conducted between January 6-18, 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 pushed major market averages to new highs in optimism next year. After declining to an estimated 12.5% in 2020, S&P 500 companies are expected to increase by 23.6% this year, according to Refinitiv data.
More than 120 U.S. executives surveyed by a non-partisan think tank, the Conference Board, said in early November to early December that Covid-19 is their main concern and potential disruptive business in 2021. After that, they said that the availability of vaccines could have the greatest impact on their business.
Rick Gates, senior vice president of pharmacy and healthcare at Walgreens Boots Alliance Inc., said in an interview that the company expects a return to normalcy as the vaccine is distributed, but much will depend on how long the immunity lasts. The company worries that Covid-19 could prove to be a more permanent device of life, a serious and deadly disease that will require annual vaccines, he said.
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Problems with the distribution of the vaccine in other countries could also derail 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. Body.
and other operators canceled their navigation until April 30, but talked about resuming US travel this year.
Arnold Donald, CEO of Carnival, said in January that the company was working to bring all its ships back into service by the end of 2021, thanks to the development of low-cost tests and new therapies. “The pace of vaccine distribution will certainly influence the pace of our recovery,” he said.
While the first months of 2021 are likely to be challenging in terms of continued blockades and restrictions, many executives have said they hope that by spring, enough people will be vaccinated to boost consumer confidence.
Head of T-Mobile US Inc. Mike Sievert said it was wrong to assume that the US launch would not accelerate. “I think we will see widespread vaccination by the middle of the year,” he said. Wider vaccination could benefit his company, leading to greater consumer activity and greater change from rival carriers, he said.
Some business sentiment followers suggest that leaders are optimistic. Corporate sentiment among S&P 500 companies that have reported results so far has risen to a record low from the most recent low of three-quarters ago, a Bank of America predictive analytics report found. The analysis assigns sentiment scores to transcripts of earnings calls.
Delta Air Lines Inc. chief Ed Bastian said he expects a turning point this spring as vaccine distribution continues, consumer confidence is rising and travel restrictions are rising. Other executives echoed this view, telling investors that as more people were vaccinated, they would venture on summer trips.
Stephen Cooper, CEO of Warner Music Group Corp., told analysts that as the company waits for clarity on the effectiveness of vaccines on new strains, it will continue to promote live broadcasts at in-person concerts. He said the music company hopes the live shows can resume “sooner rather than later.”
—Sharon Terlep and Suzanne Kapner contributed to this article.
Write to Sarah Krouse at [email protected]
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