One of the "good" things about this pandemic is that I no longer commute into the city. This gives me more time to vegetate in front of my computer. So, good/not good. Since there are no sports (yet!), I have also had a chance to catch up on plenty of re-runs and, without a doubt, "The Office" is my favorite. I don't care how many times Dwight finds his stapler encased in Jell-O—it's still funny.
Just pause and think about how much has changed. Perhaps
forever. The ripple effects are huge.
If you scan my description above, you can already spot the
incredible impacts that must be hitting many industries and companies. Let's
start with reasonable attire. Many of the people I work with are in the banking
industry. I have been to countless banks in almost every state of this country.
I don't think I have EVER entered a bank to find neither the receptionist
wearing Lululemon leggings and a t-shirt, nor the CEO lounging in shorts and a
golf shirt. It just didn't happen. Side note: LULU stock has gone from $128.85
on March 18th, to $329.85 on July 20th. Great news for
LULU and other companies in comfort and sports attire, but terrible news for those
delivering more formal attire,
like JoS. A. Bank or higher-end department stores. A good example of this is a
retailer that I have long favored for buying my work clothes, Nordstrom (JWN). It
has always been well run: The clerks have always been knowledgeable, and the
stock has always been broad, from belts to shoes to shirts to suits. I knew their
sales model was effective because any time my wife said she was going to
Nordstrom, a big credit card bill soon followed.
In the current world, however, Nordstrom has been crushed.
In contrast to LULU, JWN stock has fallen from the low $40's, to around $15. They're
about to miss out on their traditional back-to-school traffic, too. Anecdotally,
I have heard that the Nordstrom experience is suffering as well. I understand
that the available stock is way down, and the clerks are few and far between
and not as attentive. This makes me think: I wonder how my dry cleaner is
getting by?
How about transportation? My commute in Chicago consisted of
a drive to the train station where I paid a parking fee, and then a 45-minute
train ride downtown. It used to be that if you were not at the parking lot by
6:30, you would have trouble finding a spot. I went by that station the other
day at 8:00 in the morning and there were about 10 cars in the lot. The ripple
effects of just this are actually quite large. It has to impact every little
town collecting commuter parking revenue. In my town, there are two train
stations. Each one has parking for at least
750 cars. At $1.50 a day multiplied by 1,500 cars, that is $2,250 of lost
revenue per day; $11,250 per five-day work week; ~$45,000 per month. That adds
up! Multiply that by the hundreds of train stations around Chicagoland and we're
talking real municipal revenue impacts -from just that one little aspect!
I previously mentioned my business travel. I think the
airlines were feeling like things were really going to start to pick up this
summer, expecting the pandemic to wane. I came across some really amazing
numbers from the TSA regarding airline passenger throughput. At the low point
on April 14th, only 87,534 people went through a TSA checkpoint. On
the same date last year, they subjected 2,208,688 human beings to their
friendly attention. That means we had only 4% of the normal flow this past April.
That is astounding. Last week saw 747,442 people herded through security, only
27.5% of the amount on the same date last year when 2,727,355 people funneled
through. An increase, but it looks like it is plateauing. Will business travel
ever return to normal? Hard to say, but I'm betting it will be quite a while. I'm
pretty sure most people don't want a salesperson from another state showing up
in their office just so they can be "face-to-face". If you would like to geek
out on this kind of data like me, check out the TSA website.
Back to my old normal description: Going to the office was
usually included some form of to-go coffee or breakfast snack. This aspect has also
dramatically changed. Fast and convenience food companies seem to be adjusting
quickly to the new normal scenario. McDonald's did simplify their all-day
breakfast menu. Starbucks seems to be doing pretty well in the suburbs. When I
drive by one, there is almost always a huge line of cars at their window. However,
their huge commuter stores in larger city centers have definitely suffered. It
appears that many people working from home find comfort in hopping in their cars
for a quick break to grab a coffee—perhaps in the long run, Starbucks will come
out ahead, who can say?
Back to my description, and the title: The Office. This is
where I really think we are going to see major change. One of the noticeable
themes in many earning releases lately is an intent to decrease physical
footprints. The large office buildings in the most metropolitan areas have got
to be feeling a little (or maybe very) nervous. These buildings are not
inexpensive to own and operate. The electricity expense alone has got to be
huge. Don't forget security or maintenance either. Not cheap. If many or most
of your tenants suddenly want to decrease their footprints, you are suddenly
facing a very troubling picture. Many banks have echoed this sentiment, suggesting
they want to decrease the number of their physical branches, which may align
with customers' new reluctance to bank in person. There is also evidence that residential
renters are leaving the city centers. Given the pandemic, no night life, and limited
dining, the appeal of living in a big city may be decreasing right now. It's a
real shame, because many of these cities have made so much progress over the
last 10-15 years. Young people were flocking to downtown areas. At the very
least, this renewal has hit the pause button.
I'll end on a slightly more positive note. In my heart, I
believe that some form of vaccine or treatment will soon be found. I read an
interesting article on a form of testing whereby one can take a quick, at-home
test every day. It's basically a saliva test costing $1-2 per day. The
suggestion was that students could take this test every morning before school
and either attend or stay home based on the result. Even with the decreased
accuracy compared to nasal swabs, I understand that the models show that the risk
of widespread infections from open schools would go way down under this
protocol. There are also several promising clinical trials underway for a
vaccine. There are many, many extremely smart people working on a wide range of
solutions, so let's keep our fingers crossed. While I know I am not smart
enough to understand all of the science involved, I get enough of out of the
reports to be hopeful.
By the way, if you need a little chuckle, here
is the Jell-O scene I referenced at the beginning of the post.
Final, final thought: Given the chance to go watch a live
baseball game at Wrigley this week, would I take the chance? Yes, yes, I would.