In a bleak virus economy, these companies are flourishing
‘Unprecedented’ sales at Tractor Supply; consumer-goods makers also see boom
Leesburg, Va. — Tucked into a suburban shopping center about two miles from a Civil War battlefield, this Tractor Supply Co. outlet has become a rare hot spot in an economy that has gone ice cold.
Since the first days of the coronavirus pandemic, the retailer for farmers, ranchers and suburbanites who fancy themselves farmers or ranchers has enjoyed what its chief executive calls an “unprecedented” sales surge. Fencing, bird feed, plumbing supplies, pet food, outdoor apparel, live chickens, lawn tractors — just about anything in stock has been flying out of its 1,881 stores nationwide.
“It’s been very steady,” said Tim Linch, 51, the store’s manager. “Early on, when everybody else was closed, people were coming in just because we were open. I’ve never seen so many people thank me.”
Tractor Supply’s good fortune — second-quarter profits jumped more than 50% — not only seems at odds with the overall collapse in business activity across the country, but also reflects the economic remodeling that the pandemic has unleashed. With record sales and earnings, the rural-oriented retailer is among a select group of companies that are prospering despite — or in some cases because of — the pandemic.
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cloud-computing business booked record revenue in the quarter that ended June 30. Consumer goods maker Church & Dwight expanded manufacturing capacity for its Arm & Hammer laundry detergent to keep pace with demand, even though sales of its Trojan-brand condoms slumped in an extreme example of social distancing. And Albertsons, the nation’s second-largest supermarket chain, reported that samestore sales leaped by more than 26% compared with the same period last year.
The rise of some companies, and the fall of others, comes as the economy struggles to recover from the record 9.5% quarterly decline in economic activity over the spring.
But rather than a temporary interruption of normal commerce, the global health scare and subsequent recession is altering spending, saving and investing patterns across the $19.4 trillion economy.
“The longer it goes on, the more lasting the ramifications will be,” said Bill McMahon, chief investment officer for active equity strategies at Charles Schwab Investment Management.
Investors are struggling to distinguish between fleeting and permanent changes. Already, clothiers specializing in attire for offices that people no longer frequent such as Brooks Brothers are sliding into bankruptcy while producers of more casual garb like Lululemon prosper.
In the days ahead, Americans may leave the cities for suburban and rural areas, denting prospects for commercial real estate and boosting the residential market. Cashless payments could finally eclipse traditional currency.
Not all of the changes have solidified. But the emerging new normal will mean less money spent on air travel and more on stay-at-home comforts, which explains disappointing earnings from commercial airline maker Boeing and General Electric, which makes aircraft engines.
When nonessential businesses began shutting down in March, many economists anticipated a brief interlude that would allow the United States to “flatten the curve” of the pandemic before resuming normal life.
In a March 11 Oval Office address, President Donald Trump called the shutdown “just a temporary moment of time.” His administration three weeks later introduced a Paycheck Protection Program designed to provide small businesses an eightweek financial bridge to see them through the maelstrom.
Now, what initially seemed like an economic pause is becoming a more-thorough makeover. Amid the second-quarter carnage that included gross private investment plunging by nearly one-half and consumption expenditures falling by more than one-third, Americans increased spending on just a few categories, including motor vehicles, recreational goods and housing.
David Kotok, chairman of Cumberland Advisors, likens the ongoing transformation to the difference between the Grand Canyon’s northern and southern rims. Much of the view is the same in each place, but the plant and animal life, even the weather, is distinct.
“In January, Macy’s was in the S&P 500. In July, it is not,” he said.
Last month, Procter & Gamble reported strong quarterly earnings, including a 14% sales gain in detergents and household cleaners, as Americans scrubbed and cleaned to ward off the coronavirus.
The reshaping of consumption also is leaving a mark on media and entertainment provider Comcast. As consumers hunkered down, revenue for the company’s theme parks evaporated. Attractions such as Universal Studios Hollywood remain closed and the company collected just $87 million at its theme park turnstiles, down 94% from $1.5 billion in the same period last year.
At the same time, Comcast reported a record second-quarter net gain in cable customers and its highest increase in high-speed internet hookups in 13 years.
“I am confident in our ability to continue to successfully navigate the impact of COVID-19, and emerge from the crisis even stronger,” chief executive Brian Roberts said.