While the U.S. economy continues to rebound, the Delta variant remains a wildcard to growth potential in the coming quarters. With the virus on everyone’s minds, we wanted to provide you a front row seat to what management teams are saying about the variant, and how it is affecting their business or the broader economy.
Below is a collection of some of high-level comments from management teams during the recent earnings season:
- For retailers, the impact of the Delta variant has been mixed. Off-price retailer TJX noted that while “open-only” store sales comparisons were up for the most recently completed quarter, management has seen a negative sales impact from the Delta variant since the last week of July. Lowe’s, meanwhile, noted that it had enjoyed a strong first half of the year, but that the business remains in a fluid environment and that the Delta variant is “injecting new uncertainty into the forecast.”
As a positive, Target’s CEO noted the management team was out at stores seeing customers “shopping our entire back-to-school assortment.” He noted the back-to-school shopping season had been “really strong.”
- People are still going out for many, but not all, services and experiences. Disney’s CEO noted strong demand for the company’s theme parks, with current reservations above the company’s attendance levels for the quarter ended July 3, which was a strong quarter itself and one that returned its parks to a profit. In what is likely a good sign for restaurant activity, SYSCO Corporation, which distributes food products, smallwares, and kitchen equipment to restaurants and other industries noted that the restaurant sector of its business is near full recovery, with local sales in cases shipped up compared to 2019 volume levels. Management noted the recovery happened faster than predicted and “despite the presence of the Delta variant.”
However, Norwegian Cruise Lines noted it has seen a decrease in net new booking activity since the variant surfaced.
- Labor is an issue. Tyson foods noted that labor remains the biggest issue they face. To help workers, they have increased wages, created flexible shifts, childcare and onsite clinics but that the Delta variant has been a “disruptor.”
- Companies are preparing for work flexibility. Technology conglomerate Cisco Systems noted that its own business clients are in the midst of doing the things they have to do to adapt to a world that’s not only a hybrid work world, but one in which the rise of the Delta variant has added to complexity.
