Consumer, construction firms face changes
While Houston’s energyheavy lineup of high-earning public companies took a beating in 2019, the city’s largest private companies, by and far, thrived.
Revenues grew at vehicle dealerships, engineering companies, homebuilders and retailers. Many companies catered to Houston’s quickly growing population, building homes, businesses and water and sewer systems or providing equipment and services for construction.
But despite the success in 2019, the city’s private companies face a changed landscape in 2020.
“This list is heavily weighted in two areas: the consumer side and the construction side,” said Patrick Jankowski, an economist with the business group Greater Houston Partnership. “And both of those are facing challenges.”
Restaurants, hospitality and entertainment, hallmarks of Houston companies such as Landry’s, were pummeled by the pandemic, which closed dining rooms, kept people at home and shut down large events such as basketball games and conferences. In March, Landry’s closed its restaurants and casinos, losing more than $2 million a day, according to its chief executive, Tilman Fertitta.
Retail, already struggling to contend with online competitors, was also hard hit as social distancing orders encouraged people to stay home and record unemployment led many to cut back on spending.
A weaker consumer market will challenge companies such as the Friedkin Group, which owns Gulf States Toyota and claimed 2019’s number two spot for the city’s top private companies with revenues of $9.4 billion. The analytics company Fitch Solutions forecasts the downturn will mean fewer people buying cars and more struggling to pay loans.
The Friedkin Group did not comment on potential impact of those trends on its business.
Give and take
Stay-at-home orders, however, increased demand for certain goods. Alcohol sales sold directly to consumers, for example, rose 27 percent from the year before in the week ending April 11, according to Nielsen, which tracks retail trends as well as media ratings. Fitness equipment sales increased 130 percent year over year, according to the consumer analytics firm The NPD Group.
But those increases were complicated by losses of other revenues and an ever-changing business landscape. While alcohol sales for at-home consumption were up, for example, they fell dramatically at bars and restaurants, offsetting the gains for liquor stores that supply them.
Forty percent of companies on the list, including the homebuilder David Weekley Homes and the commercial construction firm Arch-Con Corp., were involved in construction or supplying construction materials or equipment. Construction has long been a source of growth for the Houston economy, but the industry has only begun to recover from the impact of the pandemic.
In February, the industry employed 243,200 people in the region, according to the trade group Associated General Contractors of America. By April, the industry figure had fallen 12 percent to 212,900 — a loss of 30,00 jobs. In May, the industry regained only 8,100 jobs.
Ken Simonson, the association’s chief economist, said May’s gains in construction employment were concentrated in homebuilding, while jobs in heavy and civil engineering construction continued to shrink along with government tax collections.
“Unfortunately,” he said in a statement, “those infrastructure-related jobs are likely to keep declining as state and local governments postpone or cancel projects in order to cover the huge budget deficits they are facing.”
Not the first rodeo
While businesses across the board face headwinds in 2020, Jankowski noted that many of Houston’s top private companies have gone through trying times before.
“Many of these are companies that were founded decades ago,” he said. “And they’ve managed to stick around despite all of the turmoil in the economy over the past several years.”