We leveraged our NLP model to create the Amenity Coronavirus Tracker dashboard – a live feed which searches for relevant insights into the virus’ investment implications contained within news sources and earnings call transcripts. We highlight findings impacting retail, food delivery and teleconferencing.
While Coronavirus (Covid-19) increases its highly unpleasant impact on humanity on a daily basis, the plain fact is that capital markets remain open. Whether we like it or not, the assessment of securities pricing is ongoing. Thus we leveraged our NLP model to create the Amenity Coronavirus Tracker dashboard – a live feed which searches for relevant insights into the virus’ investment implications contained within news sources and earnings call transcripts.
Many findings have been predictable, but the focus of the Coronavirus Tracker is to uncover other, less obvious insights among the latest Coronavirus-related commentary. In this analysis we take a look at retail, food delivery and teleconferencing to showcase the latest our NLP has to offer.
Cruise companies, airlines, hotels, casinos, restaurants, movie theaters and other location-based entertainment assets are at ground zero for the pain caused by Coronavirus. High levels of capital tied up in hard assets (which are leveraged to varying degrees) in combination with a high fixed cost base equals a dire situation when revenue plummets. In what is hardly a unique insight, an alarming number of these companies are likely to fall into bankruptcy absent some form of government intervention.
One of the first things we highlight with our Coronavirus Tracker is the dichotomy between e-commerce and brick-and-mortar stores has long been a theme within the retail sector, and the dominant players in the online space are seeing unprecedented demand:
Amazon.com Inc said on Saturday it is raising overtime pay for associates working in its U.S. warehouses, as the world’s largest online retailer tries to meet the rapidly growing demand for online shopping from consumers stuck at home during the coronavirus outbreak.
While this demand surge is likely a pull-forward future consumption, staple goods are also flying off the shelves at bricks and mortar locations. More nuanced is the food situation: total spending at bars/restaurants surpassed that at the grocery store for the first time just a few years ago. Delivery had become a larger percentage of total sales for most restaurants before the pandemic, and their delivery partners are doing their very best to encourage sales to offset rapid declines and closures of on-premises dining:
In collaboration with the mayors of large cities across the United States who are on the front lines of the COVID-19 response efforts, Grubhub today announced it is temporarily suspending collection of up to $100 million in commission payments from impacted independent restaurants nationwide.
DoorDash is waiving fees for restaurants, hiring out-of-work waiters and delivering food to the needy as the new coronavirus radically changes the restaurant industry.
In our analysis it seems possible or even likely that aggregate restaurant food delivery revenue will increase on an absolute basis during the Coronavirus crisis. However, the near-term winner in the food space appears to be grocery stores and in particular, online grocery shopping:
Downloads of Instacart, Walmart's grocery app and Shipt increased 218%, 160%, and 124% respectively last Sunday compared with a year prior. ‘We are seeing a larger percentage of customers over the age of 60 that are coming online,’ said JJ Fleeman, chief e-commerce officer for Ahold Delhaize in the United States, which owns brands like Stop & Shop, Food Lion and the online delivery service Peapod. ‘We're seeing a lot of new customers coming into the channel.’
Clearly, in-store traffic is also up at grocery outlets. However as with staple goods, consumers are stocking up on food now which is likely coming at the expense of future purchasing:
Further up the supply chain, industry groups say that there’s no current shortage of food in the pipeline — after all, U.S. consumers aren’t eating more overall, they’re just buying their food all at once.
Retailers that sell non-essential goods and rely heavily on their bricks and mortar operations are obvious losers in the immediate wake of Coronavirus, while other companies such as Netflix stand to gain in this time of duress. But of particular interest is the question of how this period will impact future consumer behavior. As Coronavirus eventually passes, will habits formed during the crisis lead to permanent change? How much of the increased online consumption sticks? Will the demise of many malls across the country accelerate? As on-location diners begin to reemerge, does restaurant delivery recede? Does the trend of bars / restaurants taking share from grocery stores revert back?
One area of particular interest to everyone is the Working From Home (WFH) segment. Ever-expanding virtual capabilities have fueled growth in WFH for some time, and it seems possible that work conditions experienced during Coronavirus could more permanently hasten this trend:
Slack added 7,000 new paid customers between February 1 and March 18 this year, the company said in a new filing on Thursday [8-K dated March 18]. That's more in less than two months than in either of its previous two quarters, as it sees a surge in usage due to the coronavirus, which is forcing more people to work from home.
Zoom hasn't said exactly how many new users it's gotten amid the current crisis, but has hinted that the number is substantial.
The hope is that the Coronavirus crisis ends soon. However as we stand now, meaningful, forced changes in human behavior are afoot. From an investment standpoint, the questions are, for how long this will last, and will portions of these changes be permanent? The implications are many.
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About Amenity
Amenity Analytics is the industry leader in providing insights from unstructured text by using Natural Language Processing (NLP) assisted by Artificial Intelligence (AI) and Machine Learning (ML). Amenity’s NLP system is a sector-agnostic, language-dependent tool for quantitative text analysis that is deployed across the financial services industry and beyond.
This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.
Copyright ©2020 Amenity Analytics.
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