|Expense ratio (net)||N/A|
|Last cap gain||N/A|
|Morningstar risk rating||N/A|
|Beta (5Y monthly)||N/A|
|5y average return||N/A|
|Average for category||N/A|
(Bloomberg) -- With Prime Minister Shinzo Abe teetering on the brink of declaring a state of emergency over the coronavirus, Tokyo is bracing for a critical weekend that could determine whether Japan can continue to sidestep the surge in outbreaks that have crippled other rich nations.While businesses have shuttered their doors across the U.S., U.K. and Europe, Japan has been an archipelago of calm. Throngs of people ventured outside in warm weather over the past three-day weekend to admire cherry blossoms, shop in arcades and dine in restaurants even as millions of others across the globe took shelter, venturing outside only to seek out provisions.A week later, more than 30 million people in the greater Tokyo metropolitan area are being asked — though not forced — to stay at home. The big question is whether infection numbers continue to creep higher as they have over the past week, spurring Governor Yuriko Koike to call on the residents to avoid unnecessary trips outdoors for two weeks. Surrounding areas followed suit, and told their citizens not to travel to Tokyo.“This weekend is a crucial test,” said Kenneth McElwain, a professor at the University of Tokyo’s Institute of Social Science who specializes in public opinion. “If the number of reported cases in Tokyo continues to go up, then we may see greater demand for the national government to step in.”Relatively speaking, Japan has been unscathed, with only around 1,500 confirmed cases in a country of more than 120 million. That compares with almost 86,000 cases in the U.S., 47,000 in Germany and almost 12,000 in the U.K.Japan reported more than 100 new cases on Friday, the largest one-day increase since January, according to the health ministry. The Defense Ministry sent troops to help quarantine at Narita International Airport on Saturday, and to transport people entering the country to shelters where they will be tested for the virus.Abe ConferenceMore than 60 new cases were confirmed in Tokyo on Saturday, the biggest daily increase, Kyodo News reported, citing an official it didn’t identify. There were at least 40 new infections of the virus in each of the previous three days, according to official figures. That spike has made the capital the epicenter of the outbreak in a country that so far has avoided the worst of the pandemic.“I’d like to ask residents to refrain from being in enclosed spaces, crowded places or close contact with each other until April 12,” Koike said at a news conference. “I want the people of Tokyo to keep calm and buy only what they need, and to understand that we’re taking these necessary measures to protect their lives, and the lives of their loved ones.”Abe is due to hold a news conference at 6 p.m. in Tokyo later on Saturday.The rising numbers and Koike’s exhortation appear to have changed the mood, even fueling panic buying in supermarkets across the capital. Even so, it’s difficult to gauge how effective the move will be, given that she lacks the legal authority available to leaders in other nations to force businesses to close or keep people at home.Drunken RevelersAt stake is whether Tokyo’s citizens heed the warning — and whether the city might end up like New York, another major international metro area that’s been broadsided by the outbreak. One concern is younger Japanese — the most likely group to be asymptomatic spreaders of the infection — ignoring Koike’s call.“Even though the governor made this request, people are going out at night,” Hideo Yamada, a lawyer, said on a Fuji Television broadcast. “The problem will be how much of that happens this weekend.”Hiroshi Yasuda, a shopper in Sugamo, said the call from Koike was too weak. “People aren’t going to take it seriously,” he said, adding that he’s been avoiding trains and drinking out less. “They’re stricter in the West. They need to close the busy districts in Ueno, Shibuya and Shinjuku!”Spring weekends are usually a festivity of eating and drinking, coming at the peak of the cherry blossom-viewing season. Many have speculated that the crowds of last week may have even led to the recent jump in new infections. As a result, perhaps, Koike has blocked access to some of the capital’s most famed cherry blossom spots this weekend, including the parks of Ueno and Yoyogi, where drunken revelers congregate for “hanami” parties.The banks of the cherry blossom-lined Meguro river, another popular hanami hotspot, were less crowded than usual Thursday evening. Illuminations have been canceled, and areas where people normally sit and drink were cordoned off with rope. Instead of beer, many were conspicuously carrying packs of toilet paper, which had been restocked at the nearby Don Quijote supermarket.State of Non-EmergencyAbe reiterated Friday that Japan does not yet need to declare a state of emergency, which would give regional authorities greater power to close businesses and issue shelter-in-place directives. Even so, that might not be enough, according to Yamada. “Under Japanese law, even if an emergency is declared, you can ask people to refrain from doing things, but there is no power to punish them,” he said.That would include citizens like Emi Satake, a company worker, who said she was moving house on Sunday and had no intention of altering her plans. “I’m not changing it,” she said. “That’s the only day I can do it so it can’t be helped.”Some businesses are responding to the call. Starbucks Corp. will close hundreds of stores in Tokyo and nearby prefectures this weekend. Toho Co. will shutter its cinemas, while retailing giant Aeon Co. will close its malls. Even the iconic Shibuya 109 teen fashion department store will stay closed. The voluntary steps are reminiscent of those taken in the aftermath of the 2011 earthquake and nuclear plant explosion, when companies and households responded to calls to reduce power consumption.To a certain extent, Koike and Abe, for now, are relying on the country’s propensity to follow orders, according to McElwain.“If Governor Koike’s request to avoid unnecessary mingling actually alters people’s behavior, then it may well be the case that social pressures are quite strong here, even without legal penalties,” he said. “That many department stores, movie theaters, and the like, are shutting down or reducing hours suggests that ‘shaming’ is a powerful deterrent.”Panic buying after Koike’s speech on Wednesday also jolted many out of their complacency, with shoppers seeking not just toilet paper and masks, but instant noodles and canned foods. In a widely shared tweet, the National Supermarket Association of Japan criticized media coverage of the stockpiling, saying that logistics chains weren’t impacted, stores would remain open and shelves would soon be replenished.Nature may even lend a helping hand. The Japan Meteorological Agency is predicting a turn in the weather, with recent high temperatures set to halve by Sunday. Even better, late-season snowfall is forecast for the metropolitan area.(Adds Kyodo report on new Tokyo cases in the seventh paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Grubhub founder and CEO Matt Maloney talks with Yahoo Finance about how the food delivery business is navigating the coronavirus pandemic.
Yahoo Finance catches up with Yum! Brands CEO David Gibbs to discuss how his business is faring during the coronavirus.
(Bloomberg) -- While most money managers hunt for bargains in the market upheaval, Jonas Kron is searching for good guys.“We’ve sought to find companies that invest in their employees rather than treat them as disposable,” said Kron, who helps oversee $3 billion as director of shareholder advocacy at Boston-based Trillium Asset Management.The drive toward sustainable investing has shifted in response to the coronavirus, which has spread to 170 countries. ESG investors such as Kron haven’t quit caring about limiting fossil fuels, cultivating diverse workforces and reducing the use of plastics, and they’ve always taken an interest in worker welfare.But they’re focusing more now on how companies treat employees during the pandemic. While the Federal Reserve commits trillions to rescue financial firms and the U.S. Congress readies checks for a couple thousand each to working Americans, Kron is one of a group from Wall Street’s buy-side that sees it as part of the job to look out for them.“The American worker, who’s the backbone of the economy, has been in a tenuous position,” Kron said. “The coronavirus is making apparent to a lot of people the consequences of not having a significant social net.”Companies’ interactions with employees during the health crisis also preoccupies John Streur, chief executive officer of Eaton Vance Corp.’s responsible-investment unit, Calvert Research and Management. Among the issues are how employers deal with contract workers, whether they cut loose employees or keep paying them during the pandemic, whether they provide adequate medical insurance and if they allow working from home.“People will remember how companies treated their workers and how they behaved within the community,” Streur said.Oil CollapseAt the same time, Benjamin Allen of Parnassus Investments is keeping an eye on the communities most affected by the historic fall in oil prices.“Just think about the mom-and-pop stores, the restaurants in West Texas and other communities that were booming just a year ago,” Allen said on a conference call with investors last week.The funds the three represent have mostly beat the S&P 500’s 23.9% drop this year through Tuesday. The Calvert Equity Fund is down 17.8%. Parnassus’s Core Equity Fund has tumbled 20.6%, while Trillium’s ESG Global Fund has lost 23%.The landscape for American workers looks grim. Airlines, manufacturers and local businesses are among the businesses that have cut back operations or shuttered them entirely to stem the spread of Covid-19. The national jobless rate could surge above 8% in the next three months, according to Bloomberg News calculations. Other estimates look worse. James Bullard, president of the Federal Reserve Bank of St. Louis, said unemployment could hit 30% in the second quarter.Among the 100 largest U.S. employers, 36% have adopted some form of paid sick leave and 28% continue to pay hourly employees affected by changes in operational hours and closures, according to an analysis by JUST Capital, an ESG research group that’s tracking how U.S. workers are faring during the pandemic.“A number of companies have updated their policies as many as four times since the virus outbreak,” said Alison Omens, the nonprofit group’s chief strategy officer.The three leaders in ESG investing said they keep tabs on companies they believe are doing the right things.Relief FundKron said he likes Microsoft Corp.’s requirement that contract companies provide paid leave to their workers.Streur cited financial-software maker Workday Inc. and Shopify Inc., an online showcase for merchants, as helping to blunt the economic effect of coronavirus.Workday, with 12,200 employees, announced a one-time cash bonus equivalent to two weeks pay for each active worker. The company said it’s also creating a relief fund, expanding benefits like paid sick leave and childcare and giving employees access to a meditation app.“That’s an example of a company taking an initial step that’s more comprehensive than those who are giving employees $1,000 to ensure they have the right office supplies,” Streur said.Allen lauded Waste Management Inc. and Starbucks Corp. for safeguarding employees and customers. Waste Management said it would guarantee as many as 40 hours of pay a week for employees during the pandemic. Starbucks said it will expand emergency pay for U.S. staff. The coffee chain said it will also offer “additional pay replacement” for as many as 26 weeks to employees unable to return to work.One thing the three investors have in common: a distaste for stock buybacks, which they said put executive bonuses ahead of investment in workers.“We need to tell companies they need to use their cash to take care of employees,” Streuer said. “In the long term, that will have a positive impact on the stock.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Bill Ackman said he has invested a portion of his personal wealth to help manufacture antibody testing kits produced by Covaxx, a newly formed subsidiary of closely-held United Biomedical Inc., amid the outbreak of the coronavirus.Ackman has repeatedly called for a complete shutdown of the U.S. for 30-days to help combat the spread of the Covid-19 virus. He has also called for antibody testing, like the one Covaxx develops, across the country to determine who has been contracted the virus.“The key to a successful reopening beyond the maintenance of social distancing, hand washing, mask use and other related practices is a broad-based testing regime and tracing program,” Ackman said in a letter on Wednesday to investors in his hedge fund, Pershing Square Capital Management.“This will enable the inevitable viral breakouts to be identified early and minimized with localized quarantines, reducing the impact on the overall U.S. economy and the need for future shutdowns,” he said.HedgesAckman made a roughly 100 times return on hedges he had put in place to protect Pershing Squares’ $6.6 billion portfolio against the impact of the virus, according to the letter.His firm paid roughly $27 million for the hedges, which were made in the form of purchases of credit protection on investment-grade and high-yield credit indices. The hedges generated $2.6 billion in proceeds by the time he exited them on March 23.He said he has since redeployed the capital by investing further in his portfolio companies, including Lowe’s Cos., Agilent Technologies Inc., Hilton Worldwide Holdings Inc., Restaurant Brands International Inc., and Warren Buffett’s Berkshire Hathaway Inc. He also reinvested in Starbucks Corp.“The proceeds of the hedges have enabled us to become a substantially larger shareholder of a number of our portfolio companies, and to add some new investments, all at deeply discounted prices,” he said.Ackman said in an interview on CNBC on March 18 that “hell is coming” if drastic measures were not taken to combat the virus. A week later, he said in an interview with Bloomberg TV he had made a $2.5 billion “recovery bet” on a bounceback, after gaining confidence “that the president and his team are heading in the right direction.”Covaxx has already deployed over 100,000 Covid-19 tests in China, and is currently testing in San Miguel County, Colorado. The company believes it can scale the tests to hundreds of millions in “relative short order,” Ackman said. The billionaire made the investment through the Pershing Square Foundation, which manages his personal wealth. He did not disclose the size of the investment.Health officials in San Miguel County, home of the popular ski-town Telluride, teamed up with United Biomedical earlier this month to collect blood samples to test the kits and provide free screening to people in the area.The tests can determine whether a person has been infected by Covid-19 within hours, rather than the days it takes for the current, drive-thru nasal swab tests.Broader antibody based screen will give an accurate estimate of what percentage of the population is infected, Ackman said. That will allow more accurate data on the virus’s characteristics, such as how many people become critically ill and how many have only limited symptoms.“Imagine how differently and effectively we could have managed this crisis if we actually knew who was infected,” he said.United Biomedical has spent years producing vaccines for animals and working on human treatments for diseases like Alzheimer’s and Parkinson’s. It manufacturers its test kits on Long Island, New York.The company has been around for more than three decades. Its animal vaccines have been used to protect billions of farm animals from foot-and-mouth disease and to chemically castrate pigs. It also has developed blood-screening kits and a test for SARS, or Severe Acute Respiratory Syndrome.“We believe it is inevitable that in order to halt the advance of the virus and preserve the ability of local, city, and state health-care systems to deal with the volume of critical care patients, nearly all states will eventually initiate strong-form, non-essential business closures and stay-at-home regulations,” Ackman said.(Updates with additional details in the final paragraph; An earlier version of this report corrected the return on Ackman’s hedges)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The age of the virtual AGM is upon us.Amid lockdowns, travel bans and restrictions on indoor gatherings to curb the spread of the coronavirus, companies are shifting their annual general meetings online.Starbucks Corp. last week converted its annual gathering into a virtual meeting, and Warren Buffett has told shareholders they won’t be able to physically attend Berkshire Hathaway Inc.’s event in May, with proceedings to be live-streamed. Regulators in the U.S. and Australia have both signaled support for virtual AGMs amid the widening virus curbs.The move is opening up the annual events, which are often poorly attended and over-represented by retirees, to a wider pool of investors. And it’s accelerating the adoption of new technology as even companies that resisted embracing the digital era now have no choice.Offering access “to people near and wide, whether they’re watching it from work or in a different country, automatically gives you a much broader representation of your shareholders,” said Susan Massasso, chief growth and brand officer at A2 Milk Co., an infant formula producer which has held four annual meetings with online access. “As a consequence there’s a much more broad and diverse range of questions and comments.”Attendance at A2 Milk’s 2019 event jumped to 708 people from 444 a year earlier, and included 528 online participants, according to Link Administration Holdings Ltd., which offers services including facilitating annual meetings.“Our attendance, including in-person and virtual, has been increasing over those years, so it’s clearly working,” Massasso said.Rio Tinto Group, the world’s second-largest miner, on Wednesday advised investors not to attend a scheduled May meeting in Brisbane in person and said it was investigating the prospect of offering remote access.Link’s analysis of more than 1,800 meetings held in Australia last year shows how few people typically show up, with the events attracting an average of 0.2% of shareholders. Most gatherings are also held during working hours, meaning retirees are typically the best-represented group, the study found.There’s been a spike in demand for virtual meetings from markets including Australia and the U.K. as companies seek to respond to social distancing measures, said Lysa McKenna, co-chief executive officer for corporate markets at Sydney-based Link.“Directors who’ve been nervous to engage solely through a virtual technology platform are now accepting that could be the only way to be able to engage with investors,” she said. “What’s changed here is this will become an acceptable form of a technology solution as a result of Covid-19.” Some clients have doubled or tripled attendance by offering virtual access, she said.There’s a potential downside, however, according to Brynn O’Brien, executive director of the Australasian Centre for Corporate Responsibility. The online format could make it easier for companies to avoid repeated challenges on the same topic and limit opportunities to spar with directors, said O’Brien, whose group has frequently used annual meetings to demand greater action to address climate change.There’s a danger of a “more constricted, narrower and less constructive debate” if companies use the tools to muzzle dissent, she said. “It may just end up being a piece of theater engineered by the company to be within their comfort zone.”In response to the virus outbreak, some companies want to abandon in-person gatherings altogether.“Our preference is for the AGM to be virtual only,” said Andrew Cole, chief executive officer of Adelaide-based copper producer OZ Minerals Ltd., which has offered web access for the past two years and is seeking legal advice to move a meeting scheduled for April 17 entirely online.(Adds Rio Tinto decision in 8th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
In New York most restaurants are still offering takeout. Chef and restaurateur Tom Colicchio says this is a bad idea.
(Bloomberg) -- Activist investor Bill Ackman said he has made a “recovery bet” on the economy, investing $2.5 billion in equities, including upping his positions in several of his portfolio companies and reinvesting in others like Starbucks Corp.The billionaire investor said he has taken off all the hedges that he put in place for his Pershing Square Capital Management, through shorts in the credit market. Those hedges were put in place to offset the effects of the coronavirus, he said.Ackman said his hedge fund has used the proceeds to reinvest over the past 10 to 12 days in several of his portfolio companies, including Lowe’s Cos., Hilton Worldwide Holdings Inc. and Warren Buffett’s Berkshire Hathaway Inc.“That’s about the most bullish thing we’ve done,” he said in a Bloomberg TV interview. “We are all long. No shorts, you know, betting on the country.”Ackman has called for a federally mandated nationwide shutdown over the next 30 days rather than letting individual states implement their own measures for tackling the coronavirus pandemic. He reiterated that call Monday and urged for increased testing for the virus across the country.“I built a lot of confidence over the last week that the president and his team are heading in the right direction,” Ackman said, adding that he had no “inside knowledge” of what the federal government will do next.Chipotle, ZoomOne portfolio business he wasn’t able to increase his position in was Chipotle Mexican Grill Inc., which he said was trading at “crazy” prices. He said Chipotle is one of the businesses that stands to gain from the current crisis as people turn to delivery apps amid self-quarantine orders across the country.“Some companies are actually going to be long-term beneficiaries. It’s not just Zoom,” he said, referring to the video conferencing company whose shares have soared 130% this year. “Chipotle, we think, is going to be a very long-term beneficiary of what’s taken place here.”He said the sell-off on companies such as Hilton have been overdone. Pershing Square is looking at the cash flow of companies, like Hilton, which don’t carry a lot of debt, and discounting their earnings over the next 12 to 18 months. He said that shaves about 5% off their value, not 50%.Boeing, Buffett“If you can buy Hilton at $60 when it was trading at almost $120, it’s going to be a bargain,” he said.Others, like Boeing Co., will need support to get through the current turbulence, either through government aid or the private sector, from someone such as Buffett, according to Ackman.“If Buffett will do it, I don’t think the Treasury secretary should,” he said.(Updates with Ackman’s comments in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Starbucks is boosting the wages of its employees who choose to work during the coronavirus (COVID-19) pandemic.
Starbucks (SBUX) is temporarily suspending indoor access to all of its 15,000-plus U.S. cafés and will move to a drive-thru and delivery only as the coronavirus (COVID-19) continues to spread.
(Bloomberg) -- Coronavirus is sending Americans back home for dinner, creating a crisis for a restaurant industry that was already slowing down.The viral outbreak is wreaking havoc as diners isolate themselves at home and states restrict operations to carryout and delivery only. Large swaths of the industry are facing weeks, or perhaps months, with reduced or nonexistent revenue.This is a grim prospect for restaurants that were already struggling with brutal competition for a stagnant pool of customers. To make matters worse, some chains have opted to expand aggressively in recent years, which has over-saturated the market and helped to fuel an increase in restaurant debt levels, increasing the risk factor for many companies.Add rising wages to the mix -- which are likely to continue climbing due to the sudden, urgent need for expanded sick leave and benefits -- and the industry is poised for a shakeout.“You’re going to see a lot of bankruptcies,” said Michael Halen, Bloomberg Intelligence analyst, adding that smaller chains that managed to hang on because of cheap debt are the most at risk. “You’re going to see more chains go under.”The looming bankruptcies are a major problem for landlords that have relied on restaurants as stable tenants as other parts of the retail landscape are decimated by e-commerce. In recent years, fast-food chains have taken up more and more space at malls and shopping centers as apparel companies and department stores struggle. But with coronavirus now shutting down both restaurants and retailers, landlords will likely have to choose between either cutting rents or losing tenants.“Its definitely a concern,” said Vince Tibone, an analyst at Green Street Advisors. “The most likely outcome is landlords will have to concede on lower rent for a period of time.”‘Oversupply’The growth in fast-food restaurants had already slowed to the lowest rate in at least 20 years in 2019 as companies start to curb the rapid growth of the previous years. Still, capacity still outstrips demand, according to Noah Shaffer, senior director at real estate services firm Confidant Asset Management.“When you just look at what consumers can spend in a market and how many restaurants are already there serving it, you start seeing there is an oversupply,” Shaffer said. “And that happens in quite a few markets.”For years, the biggest fast-food companies, like Subway Restaurants and Dunkin’ Brands Group Inc. expanded aggressively across the U.S. -- peppering cities and suburbs with new locations on what seemed like every corner.Much of the expansion was financed with cheap debt as companies took advantage of low interest rates. Restaurants in the Russell 2000 Restaurants Index more than doubled their debt load as a share of earnings over the last five years, reaching a record high in 2019 after an accounting rule change required them to record more leases on their balance sheets. Even before the accounting change, the ratio had trended upwards in in recent years.“If they are pretty levered up already, they don’t have ability to tap into additional capital to sustain,” Shaffer said. “The risk and concern for some landlords is starting already.”Restaurant equity, meanwhile, has taken a brutal blow in recent weeks. The Russell 2000 Restaurants Index had plunged more than 50% this month, with companies like Jack in the Box Inc., Brinker International Inc. and Denny’s Corp. registering declines of about 70% in March. On the S&P 500 Index, Starbucks Corp. McDonald’s Corp., and Yum! Brands Inc. had all declined about 20% or more in the same period. Restaurant stocks broadly rebounded on Thursday along with U.S. equity markets.In a sign of the rising levels of distress, the National Restaurant Association, an industry chamber, sent a letter to President Trump on Wednesday calling for relief including tax credits and increased access to funding. The group sees a decline in sales by $225 billion in next three months, leading to 5 million to 7 million job losses. For context, it says it currently employs 15.6 million in the U.S. and is the nation’s second largest employer.It’s clear the pain is already starting: Union Square Hospitality announced it laid off 2,000 workers after closing its restaurants which include LoBall and Gramercy Tavern.Companies are also moving to immediately curb expansion. Darden Restaurant Inc. -- the owner of Olive Garden and LongHorn Steakhouse -- told investors in a conference call Thursday that it’s halting all new restaurant construction. The company also pulled its forecast for the year and suspended its dividend.At the same time, the debt issue is likely to get much worse very quickly. Darden, Denny’s Corp., and Ruth’s Hospitality Group Inc. recently announced they’re accessing or increasing credit lines. The biggest companies are seeing an impact as well: Starbucks said it will temporarily exceed the top of its self-imposed debt ratio as the outbreak has an impact on earnings, although the company isn’t changing its overall leverage policy.“There are a lot of chains that are in trouble,” Bloomberg Intelligence’s Halen said. “A lot of these restaurant chains and restaurant groups have a ton of debt and they are not equipped to deal with a situation where basically sales are getting shut down overnight”(Updates share trading in 13th paragraph. An earlier version of this story corrected Starbucks leverage position.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Restaurant Brands CEO Jose Cil shares what he discussed with President Trump and several other restaurant industry leaders.
Starbucks hosts its 28th Annual Meeting of Shareholders today, virtually, with opening remarks from Kevin Johnson, president and ceo.
(Bloomberg Opinion) -- Even if fiscal stimulus is successful in getting the U.S. economy back on stable ground after the Covid-19 crisis, the economy will inevitably be transformed. When it comes to the labor market, despite the best efforts of policy makers to help small businesses, we're likely to see employment shift to larger companies, accelerating a trend that's been in place for several years. Although both small and large businesses increased their workforces coming out of the 2008-09 financial crisis, in recent years there's been a growing divergence between the two types of employers. Since the end of 2017, companies with up to 49 workers have seen employment grow by just 130,000. Meanwhile, companies employing at least 1,000 workers have added 2.6 million employees. A prime reason for this has been the tightening labor market for service workers, with bigger businesses having an easier time increasing pay and benefits to attract people in an intensifying fight for talent. Starbucks, with billions of dollars in profits, has an easier time offering high wages and paying for workers' college education than a local coffee shop with fewer economies of scale and where a stroke of bad luck could mean having to shut down.The same size and profitability of large corporations that gave them an advantage in the tightening labor market will enable them to ride out this crisis in a way that smaller businesses might not. The first advantage is being able to withstand several weeks or months of lost or reduced sales, making do with lower profits, dipping into reserves or laying off workers. Smaller companies might not have that cushion to fall back on and -- having fewer employees to begin with -- layoffs might mean they can't stay open.Access to capital in these crises is dramatically different as well. Publicly traded companies can still fund themselves with fresh debt or equity, even if the price is higher, or have good relationships with banks that let them draw down revolving credit lines to weather the storm. Smaller companies might not have those same banking relationships. Instead, many might have to rely on the owner's credit card, which can max out quickly.There's also the reality that not all companies are losing business right now, with grocery stores and health-care providers in particular likely to increase hiring during the next few months. Kroger, for example, the U.S.'s largest supermarket chain, advertised during the weekend that it had immediate job openings it needed to fill to keep up with demand as consumers stock up for the pandemic. Amazon is also taking advantage of the surge and has announced plans to hire as many as 100,000 workers. Workers at struggling smaller businesses may jump at openings like these, exacerbating the challenge these companies are already confronting.It's more difficult for small businesses to petition the government for help during a crisis, and more difficult for the government to quickly roll out programs that can provide relief to hundreds of thousands of small, diverse businesses, each with their own issues. A systemically important industry such as airlines, with only a handful of companies, is an easier fix in theory than countless family owned restaurants that may have been struggling even before consumers stopped eating out en masse.Once the economy reaches the bottom of the slowdown, particularly if the recovery is swift, larger businesses will be able to make key investments to staff up and replenish inventories in anticipation of the revival of demand. Meanwhile, smaller companies may still be scrambling to work out concessions with landlords, key suppliers and customers.There may also be a demographic dynamic too, with older workers and business owners deciding now's the time to finally call it quits. Small business owners are more likely to be old, white men than the general population. Perhaps they kept going because times were good and it didn't make sense for them to retire yet. This crisis may end up being the impetus they need to close shop, take Social Security and spend more time with their families and grandkids. This represents a potential supply shock that could hold back a future recovery.But the economy might also experience a surge of entrepreneurialism as new founders take advantage of the holes left behind by smaller businesses that couldn't survive a shakeout. A mix of widespread retirements, small business failures and displaced workers should lead to some interesting opportunities. But for the foreseeable future, look for bigger businesses to gobble up workers from their weaker, smaller peers.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Conor Sen is a Bloomberg Opinion columnist. He is a portfolio manager for New River Investments in Atlanta and has been a contributor to the Atlantic and Business Insider.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Officials in Europe and U.S. took dramatic steps to slow a pandemic that’s killed over 6,000 people and sickened scores of others.
Workers at major corporations, top union officials, and Democratic leaders said they support many of the emergency relief measures in the bill but condemned what they consider a carve out for big corporations with outsized influence in Washington D.C — one that undermines a measure intended not only to protect employees but the public endangered by sick people forced to go to work.
(Bloomberg) -- An investigation into Coffee Day Enterprises Ltd., initiated by its board after the death of founder V.G. Siddhartha, is likely to conclude that at least 20 billion rupees ($270 million) is missing from its accounts, according to people familiar with the matter.The months-long probe following the suicide of Siddhartha in July examined the financial transactions of India’s largest coffee chain and its dealings with dozens of private companies owned by the entrepreneur. The draft report, running more than a hundred pages, points to billions of rupees that have gone missing, said the people, asking not to be identified because the details aren’t public. It also highlights hundreds of transactions between the founder’s listed and personal businesses that were not conducted at arm’s length, they said.Though the report is in its final stages, the precise details could change before its release, expected as early as this week, the people said. The missing funds could total more than 25 billion rupees, one person said.“The investigation report is still a work in progress, and not finalized,” a spokesman for the company said. “The board of directors and the company are unaware of its content at this point of time. Hence it would be premature to speculate on the investigation findings.”The priority for management and Siddhartha’s family “is to keep the business running in a challenging environment and meet all stakeholder commitments, including 30,000 jobs associated with the group,” the spokesman said.The disappearance of the 59-year-old founder last year stunned India’s business community. He had last been seen telling his driver he was going for an evening walk along a bridge in southern India; his body was found by local fishermen two days later. A letter delivered to Coffee Day’s board and employees, which appeared to be signed by Siddhartha, described massive debts and complained of pressure from lenders and tax authorities. It claimed he bore sole responsibility for the company’s financial transactions.The probe began about a month later when the company brought in Ashok Kumar Malhotra, a retired senior official from India’s federal enforcement agency, to investigate. A senior lawyer practicing in India’s top court is assisting, the company said in a regulatory filing at the time.The publicly traded Coffee Day was supposed to be India’s answer to Starbucks Corp. More than 1,500 of its Café Coffee Day outlets blanketed cities and highways, with affordable options for the country’s aspiring middle classes. The chain’s tagline: “A lot can happen over coffee.”But the empire has been battered since the founder’s death. Its shares plummeted about 90% and its market value dropped to about $80 million. Trading was suspended in February.Meanwhile, shares of IndusInd Bank Ltd. and RBL Bank Ltd., lenders to Coffee Day, were among the worst performers on S&P BSE 500 index on Monday with losses of more than 17%.India’s regulators are tracking the situation and may use the company’s final report as part of a deeper dive into its internal affairs, the people said. Coffee Day showed about 24 billion rupees in cash and cash equivalents on its balance sheet as of March 2019, the most recent figures the company has issued.After the death of Siddhartha however, the company faced a severe liquidity crunch and had “zero cash in the bank,” according to one of the people. It struggled with day-to-day expenses and paying salaries has been a strain, the person said.The draft report details personal guarantees by Siddhartha for loans taken by Coffee Day, and his unsecured loans at high interest rates from local money lenders, the people said. It also probes Coffee Day’s defaults to coffee growers and other vendors, they said.A related issue is that coffee estates owned by Siddhartha and several employees had been used as collateral for bank loans. The report found that valuations for properties were inflated to get the loans, one person said.Investigators have examined several theories about what happened to the company’s money, including whether Coffee Day was manipulating its finances to show cash and profit and whether Siddhartha was taking cash out of the listed company to pay off a large investor to whom he had guaranteed a return, the person said. From the filings of his listed and private companies, the entrepreneur’s loans had totaled more than 100 billion rupees, and he had been squeezed by borrowing to repay interest on earlier loans, the person said.In the letter purportedly from Siddhartha, the entrepreneur said he had tried his best but failed as an entrepreneur. “I am solely responsible for all mistakes,” the letter read. “Every financial transaction is my responsibility. My team, auditors and senior management are totally unaware of all my transactions. The law should hold me and only me accountable, as I have withheld this information from everybody including my family.”As the report nears release, Coffee Day is finalizing a deal with Blackstone Group Inc. for real estate assets. A large tranche of the payment is due in about a week, one person said.Coffee Day said it is working to reduce its debt load by divesting non-core enterprises.“The aim is to save employment and preserve this iconic Indian brand,” the spokesman said.(Updates with shares in 10th paragraph.)\--With assistance from Ari Altstedter.To contact the reporters on this story: Saritha Rai in Bangalore at email@example.com;Anto Antony in Mumbai at firstname.lastname@example.orgTo contact the editors responsible for this story: Peter Elstrom at email@example.com, Arijit GhoshFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Starbucks will pause café seating in the U.S. and Canada for at least two weeks to prevent prolonged social gathering amid the coronavirus outbreak.