The slow start of the introduction of the Covid-19 vaccine, coupled with the advent of new virus variants, has dropped business leaders’ hopes of returning to normal in 2021.
It is unlikely that consumers will start traveling, eating out and shopping with a cadence before the pandemic later this year, heads of some large companies have told Wall Street analysts and investors in recent weeks. Some CEOs said consumer activity could increase as fast as in the spring. Others pointed to the recovery later in the year – or even in 2022.
“Let me emphasize that the progress of economic growth depends on the effective implementation of vaccines worldwide,” said David Solomon, CEO of Goldman Sachs Group Inc. “In his absence, economic recovery will be unnecessarily delayed.”
The pandemic unevenly strengthened and derailed the growth prospects; division of labor into staff who can take refuge at home and those who must report for duty in person; and reformed consumer purchases such as stay-at-home orders. The rapid shifts made financial predictions complicated and made consumer behavior difficult to predict.
Some CEOs believe consumers are unlikely to start eating and shopping at pre-pandemic levels later.
Photo:
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 that the prospects are being challenged in the short term because of jumps in Covid-19 cases additional restrictions and temporary store closures caused.
In terms of tourism, which accounts for a large share of luxury sales, Mr. Idol will not return a crowd of travelers to its brands’ stores until May 2022. “We do not think the vaccine is sufficiently distributed in a sufficient way to create comfortable cross-border traffic until next year,” he said.
The trade group of the airline industry has warned that a recovery in 2021 may be smaller than expected after demand fell by about two-thirds in 2020. The bookings in January 2021 were 70% lower than a year ago.
“Optimism that the arrival and initial distribution of vaccines would lead to a rapid and orderly recovery in global air travel has been thwarted amid new outbreaks and new mutations of the disease,” said Alexandre de Juniac, chief executive of International Air Transport , said. Association. “The world is more locked up today than at almost any point in the last twelve months.”
Bernard Looney, CEO of BP PLC, said the pandemic was likely to weigh on the oil and gas giant early this year, and that the extent to which energy needs are recovering depends in part on the rollout of the vaccine and its effectiveness.
About 8.7% of the U.S. population has received one dose of Covid-19 vaccine since February 6, and the road to herd immunity is long.
Infectious disease specialists estimate that more than 70% of the population would need immunity to stop the spread of Covid-19 and its mutations. A survey by the Census Bureau among 68,000 adults in the U.S., which took place on January 6 to 18, found that only half of the unvaccinated adults said they would definitely get the vaccine.
Corporate profits recovered quickly due to the initial shocks of the pandemic, and investors pushed the market averages to a new high of optimism over the coming year. After the profit of S&P 500 businesses fell by an estimated 12.5% in 2020, it appears that the profit of S&P 500 will increase by 23.6% this year, according to data from Refinitiv.
More than 120 U.S. executives surveyed by a nonpartisan think tank told the conference board between early November and early December that Covid-19 was their biggest concern and that its potential disruption would be in 2021. They then said that the availability of vaccines could have the biggest impact on their businesses.
Rick Gates, senior vice president of pharmacy and healthcare at Walgreens Boots Alliance Inc., said in an interview that the company expects this to be normal as the vaccine is distributed, but much will depend on how long immunity lasts. The company is concerned that Covid-19 could be a more permanent body of life, a serious and deadly disease that needs vaccinations annually, he said.
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Problems with the distribution of vaccines in other countries can also derail US businesses. Canada, which does not manufacture its own Covid-19 vaccine, recently extended its ban on large cruise ships by another year until February 28, 2022. Corp.
and other operators canceled their voyages until April 30, but they talked about resuming U.S. travel this year.
Arnold Donald, Carnival’s CEO, said in January that the company was re-employing all its ships by the end of 2021, thanks to the development of low-cost testing and new therapy. “The rate of vaccine distribution will definitely affect the rate of our recovery,” he said.
While the early months of 2021 are likely to be challenging in terms of continued closures and constraints, many executives have said they are hopeful that by spring enough people will be vaccinated to boost consumer confidence.
Mike Sievert, head of T-Mobile, Inc., said he was wrong in assuming that US implementation would not accelerate. “I think we’ll be vaccinated widely by the middle of the year,” he said. A broader vaccination could benefit his business by delivering greater consumer activity and more switching from competitors, he said.
Some business trackers suggest that leaders be optimistic. Corporate sentiment among S&P 500 companies that have reported results so far has risen to an all-time high of a recent low of three quarters ago, a Bank of America forecast forecast found. The analysis assigns sentiment scores to revenue transcripts.
Delta Air Lines Inc. general manager Ed Bastian said he expects a turning point during the spring as vaccine distribution continues, consumer confidence grows and travel restrictions increase. Other executives have taken the view and investors have said that if more people are vaccinated, they will embark on the summer trip.
Stephen Cooper, CEO of Warner Music Group Corp., told analysts that while the company is waiting for clarity on the effectiveness of vaccines on new strains, it continues to push live streaming over personal concerts. He said the music business was hopeful that live performances “could start sooner rather than later.”
—Sharon Terlep and Suzanne Kapner contributed to this article.
Write to Sarah Krouse by [email protected]
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