Connect with us

Business

Stocks Fall on China Crackdown Worries: Live Updates

Published

on

Hertz, the car rental giant, could seek bankruptcy court protection if it fails to strike a deal with its creditors on Friday.

The company, which has seen sales collapse in recent weeks as people stay home, missed about $400 million in lease payments on its fleet late last month. It was able to persuade lenders to give it until the end of Friday to come up with a payment plan that they could accept.

Hertz had amassed $17 billion in debt, but it started the year off on solid ground: Revenue was up 6 percent in January and February. But the pandemic dealt what it has described as “a rapid, sudden and dramatic” blow. Rentals dried up in March and then a sharp drop in used-car prices dealt the company another jolt, decreasing the value of its fleet.

Its competitors were better positioned. Avis Budget Group, which has taken on less debt, said last month that it had access to enough cash to survive the year. Avis, which also raised approximately $500 million in a bond sale this month, acted more quickly to cut costs in response to the pandemic, analysts said. Enterprise, a private company, is more diversified and not nearly as reliant on airports as Avis or Hertz.

Chinese officials declined to set an economic growth target for this year and outlined plans to ramp up government spending, as they continue to look for ways to recover from the economic toll of the coronavirus.

In his annual report to Chinese lawmakers on Friday, Premier Li Keqiang said that the country’s leaders had declined to set a target for the first time in years “because our country will face some factors that are difficult to predict in its development due to the great uncertainty regarding the Covid-19 pandemic and the world economic and trade environment.”

China’s economy shrank in the first three months of the year compared with a year earlier, the first decline in the modern era, after efforts to fight the outbreak froze vast parts of its industrial machine.

China’s growth target represents a gauge of how the country’s leaders see the economy faring, and its official figures — which most economists consider to be too smooth and steady to be precisely accurate — generally meet or exceed the goal. Last year, it set a target of 6 percent to 6.5 percent.

Mr. Li’s report said China would ramp up government spending by $140 billion to stir growth, plus issue a similar amount on bonds for coronavirus recovery efforts. While significant, the spending represents about 2 percent of China’s annual economic output, a smaller proportion compared with what other countries have done. The country’s leaders are leery of putting in place the kind of debt-fueled stimulus programs that helped the Chinese economy rebound quickly from the global financial crisis a decade ago but burdened it with debt.

Amazon remains by far the country’s biggest online retailer. But the coronavirus put the tech giant on its heels, struggling to keep up with a surge in demand while keeping its warehouses safe. As it stumbled, some of its top rivals pounced, grabbing more online shoppers.

But Amazon has been making changes to get customers back. The company is shipping many more items in a day or two and is again running promotions. It has also removed limits on the types of products allowed in its warehouses, meaning that more products can arrive on doorsteps quickly.

The changes position Amazon to recapture its customers who had fled elsewhere when the outbreak took hold. And the moves signal that Amazon’s leaders feel confident that the business, and in particular its shipping network, is no longer in crisis mode in response to the pandemic.

“They eliminated their own competitive advantage they had built over 20 years,” said John Ghiorso, who runs Orca Pacific, an agency that helps brands run their Amazon business. “Now they are getting it back pretty quickly.”

The coronavirus outbreak caused China’s economy to shrink for the first time in decades in the first three months of this year. Its impact on the fortunes of the country’s biggest online shopping company was far less dramatic.

The Alibaba Group generated $16 billion in sales in the first quarter, up 22 percent from a year earlier, the company said on Friday. That was a slower pace of growth than the e-commerce giant typically reports, but it was better than Wall Street had feared a few months ago, when the company warned that sales in certain areas, such as its retail business in China, might shrink. (In fact, revenue in that segment was up 21 percent).

On a Friday conference call with analysts, Alibaba executives attributed the better-than-expected results to the Chinese government’s “effective” handling of the outbreak, which allowed the country to start reopening for business in late February and early March.

During the nationwide lockdown, sales of groceries were particularly strong, the company said. On the other hand, with people working from home and wearing face masks, sales of clothes and makeup were not as good.

Alibaba’s profit for the quarter was down by 88 percent from a year before, which the company attributed to losses on its investments in publicly traded stocks.

Business insurers are facing huge pandemic losses.

The pandemic is producing enormous losses for business insurers worldwide: “It will be $100 billion or greater,” said Evan Greenberg, the chief executive of the insurer Chubb.

Speaking to editors and reporters from The New York Times on Thursday, Mr. Greenberg said that the pandemic had turned businesses upside down, but it did not mean every business with a policy had a valid claim.

Far from it. Business interruption insurance “is an outgrowth of a traditional fire insurance policy,” he said. Policyholders have to show that they “have direct physical damage,” and shelter-in-place orders by mayors or governors do not qualify. (Some trial lawyers and lawmakers don’t see it that way.)

Mr. Greenberg said he sympathized with struggling business owners, but the general exclusion of pandemic losses from business insurance coverage is no accident. “If you had insurance to cover the pandemic, you’d be underwriting the whole U.S. economy,” he said. “It’s impossible. With a finite balance sheet, you’d be taking on an infinite risk.”

Chubb is, however, paying some business interruption claims related to the pandemic, “and we’ll be paying many more over the next weeks and months,” he said. The payouts would be “quite visible” in the company’s next quarterly results.

It was an uneasy day for global stock markets, as China’s pledges to combat the damage of the coronavirus fell short of those by other countries, and Beijing’s efforts to tighten its grip in Hong Kong worried investors.

At the annual National People’s Congress, China’s leaders unveiled a plan to spend another $140 billion to combat the pandemic’s economic effects, an amount smaller than what other countries have earmarked to fight the outbreak-related global economic crisis.

China’s plan to place Hong Kong firmly under Beijing’s control and crack down on new antigovernment protests set off a sharp decline in the city’s stock market — which fell more than 5 percent.

The move could further increase tensions between the United States and China, coming as President Trump and Republican lawmakers seek to focus blame for the coronavirus outbreak on China’s leadership as part of their re-election strategy. On Thursday, when China’s plans for Hong Kong were announced, a number of U.S. senators proposed sanctions on Chinese officials.

After recovering from an early drop, the S&P 500 was flat by Friday afternoon.

Other markets also leveled off. West Texas intermediate crude, for example, was down just 2 percent after earlier having fallen as much as 6 percent. The drop in oil futures came after they rose a total of 26 percent over six straight days.

It’s been a turbulent week for markets, with shares alternating between gains and losses as investors assessed new economic developments and the prospect of businesses reopening.

Still, thanks mostly to a big rally on Monday, the S&P 500 is set to end the week with a gain.

Logistics — the science of making Thing A and delivering it to Point B — had become a national art form, the corporate answer to jazz, stand-up comedy and end-zone dances. The United States was like an operating system that upgraded itself so regularly that its design and endless enhancements were taken for granted.

Now, the heart of the great American logistics machine is beating slowly and erratically, and in some places it has gone into full-on cardiac arrest, writes David Segal.

Rationing meat. Scrambling for masks. Running low on crucial drugs. The early shortages for the pandemic — swabs, toilet paper, ventilators — were a foreshadowing, not an aberration. We still don’t have enough good tests. Our national pantry, long bursting, lacks essentials. Come to think of it, it’s also missing some nonessentials. Just try to buy a bicycle.

The country is flunking a curriculum that it basically wrote. Which is baffling. American supremacy in logistics has been a calling card for decades, even among people unfamiliar with the L-word.

Facebook will allow many of its employees to work from home permanently, Mark Zuckerberg, Facebook’s chief executive, announced during a staff meeting that was live-streamed on his Facebook page.

The social media giant sent its employees home in March as the coronavirus began to spread in the United States. Mr. Zuckerberg said that the temporary changes caused by the virus spurred the company to re-evaluate its requirement that employees work in a shared office. Within a decade, he said, as many as half of the company’s more than 45,000 employees would work from home.

Facebook will begin by allowing new hires who are senior engineers to work remotely, and then allow current employees to apply for permission to work from home if they have positive performance reviews.

Mr. Zuckerberg’s announcement followed similar decisions at Twitter and the payments company Square, both led by Jack Dorsey. Mr. Dorsey said last week that employees at his companies would be allowed to work from home indefinitely. At Google, employees have been told they can work from home through the end of the year.

Retailers were among the first to feel the financial pain of the pandemic. During a special call for DealBook readers, Sapna Maheshwari, who covers the retail industry for The New York Times, said that stores were planning to reopen by the end of July and hoping that the trickle of revenue would keep them afloat until the holiday season.

Many, however, are closing some stores permanently, like J.C. Penney, which recently filed for bankruptcy. For malls, the loss of anchor brands could set off cotenancy clauses, giving the other stores leverage to demand rent reductions, which feeds a downward financial spiral.

And what to do with all those empty department stores? For big-box buildings that will not reopen, property owners need to be imaginative. “In the past, there have been experiential companies that make kids’ game centers in them, but that’s probably not the best idea right now in a social-distancing world,” Ms. Maheshwari said. “Maybe they become distribution centers, or in some cases we’ve even seen them become housing.”

Catch up: Here’s what else is happening.

  • General Motors said on Friday that it was delaying plans to add second shifts next week at three pickup truck plants — in Flint, Mich., Ft. Wayne, Ind., and Silao, Mexico — because production in Mexico was resuming at a slower pace than in the United States. The company restarted its U.S. plants on Monday, and is still planning to add a second shift at a sport-utility vehicle plant near Lansing, Mich. next week as scheduled. It restarted engine and transmission plants in Mexico on Thursday evening, and vehicle assembly plants in Mexico on Friday.

  • Lululemon, the athleisure company known for its $100 yoga pants, said that it expected to have 70 percent of its stores reopened in coming weeks with new safeguards in place. It plans to add cashless payments “where permissible” and ask staff to “state a daily health declaration before every shift.” The company, which had 491 stores worldwide as of Feb. 2, said that it has reopened 150 locations and is set to reopen 200 more during the next two weeks. The company declined to share details what constituted the health declaration or about specific openings in the United States.

Reporting was contributed by Neal E. Boudette, Karen Weise, Niraj Chokshi, Raymond Zhong, David Segal, Mary Williams Walsh, Paul Mozur, Jason Karaian, Mohammed Hadi, Kate Conger, Sapna Maheshwari, Carlos Tejada, Daniel Victor and Kevin Granville.

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

Some businesses better off staying closed: Chamber president – BC News

Published

on

By

Some businesses could be better off staying closed than risk re-opening during the second phase of the B.C.’s government’s plan to safely and gradually re-open the economy, according to Val Litwin, president and CEO, BC Chamber of Commerce.

“This crisis isn’t over for BC businesses. You can go out of business much faster with a partial or failed reopen than you can a temporary closure,” Litwin said. “Policy-makers must appreciate that business models will be very fragile during this early stage of the recovery cycle and that ongoing supports will be essential.”

Only 26 per cent of businesses impacted by COVID-19 feel able to restart and operate profitably with the gradual easing of restrictions, according to a survey of 1,343 member-businesses of the BC Chamber of Commerce, Greater Vancouver Board of Trade, Business Council of British Columbia, and other partners. 

The survey, conducted with the Mustel Group, was released May 22.

Given the challenges to restarting operations, over half of the members surveyed (55 per cent) expect it will take at least two months to restart.

The survey also found that 43 per cent of  businesses expect that they will still require significant and additional financial support or incentives from the provincial and federal government in order to continue operating. 

One of the challenges for business tenants is paying the rent.

The survey found that 26 per cent of commercial tenants were unable to pay their rent in full in April. The primary reason is that they were shut down and had no revenue (75 per cent). Others had no access to the federal Commercial Rental Assistance ( 30 per cent), while 19 per cent said they could not come to terms with their landlord.

In terms of businesses that have closed temporarily, the level is slightly higher in urban markets (50 per cent) than in rural (42 per cent), with the incidence highest in healthcare and social assistance; arts and entertainment; and accommodation and food services, all above 68 per cent.

Among retail establishments, 58 per cent will remain closed, at least temporarily. 

“The survey data shows virtually all respondents continue to experience lost revenue as a result of COVID-19 and restart efforts will be hampered by an inability to attract new and returning customers. We are facing the worst year for B.C.’s economy and job market in a century,” said Greg D’Avignon, president & CEO of the Business Council of British Columbia. He called on governments to “expedite economic activity and address competitiveness barriers in the form of tax, regulatory and process costs that stand in the way of businesses re-hiring the nearly 400,000 employees who’ve lost their jobs.”

Source link

Continue Reading

Business

Brunswick business put on ice due to work permit rule

Published

on

By

BRUNSWICK, Ohio — When COVID-19 was declared a worldwide pandemic in mid-March, Brunswick resident Celeste Compola watched subsequent school and business closures with the somewhat heightened anxiety of all small business owners.

“When (Gov. Mike DeWine) announced the essential businesses and was asking food trucks to help at rest areas, I thought, ‘Cool, I’m a food truck,’” said Compola, owner of Celeste’s Tasty Treats Food Truck, an ice cream business she started three years ago after working for another company for two years.

Working in her hometown during the summer of 2020, however, has proved more complicated that Compola could have imagined.

As has been the case for the past two seasons, Compola received her approval from the Medina County Health Department and applied for a vendor’s permit in Brunswick in April.

“But when I dropped (the vendor’s permit application) off at the police department, I was told no,” she said.

In an effort to slow the spread of COVID-19, the city has temporarily suspended the issuing of permits to door-to-door solicitors. As it turns out, ice cream trucks are categorized as door-to-door solicitors in Brunswick.

“It wasn’t until coronavirus that this was brought to anyone’s attention,” Compola said. “Of all the ways I thought I would be affected by COVID, I never thought it would be this.”

Revisiting business designation

While the issue is being addressed by the city, a resolution is not expected before the next City Council meeting on June 8 — meaning the last few months is time Compola will not be able to recover, even though she has been permitted to operate in surrounding communities.

At a May 19 Economic Development Committee meeting, City Councilman Joe Delsanter said that while there are additional precautions that need to be taken with a business that predominately serves children — such as an ice cream truck — the business itself is essentially a food truck, in his opinion.

“At Honey Hut, you might have 40 cars wrapped around (the building),” Delsanter said. “The only difference here is that the vendor is coming through the neighborhood.”

Economic Development Committee chairman Councilman Nick Hanek moved to have the city law department further review the ice cream truck designation, for possible legislation as soon as the June 8 council meeting.

The committee agreed with Hanek’s motion, but Delsanter said he hopes Celeste’s Tasty Treats’ dilemma can be resolved without the need to “write a law,” due in part to the seasonal nature of the business and the time and money Compola has already lost.

Councilman Anthony Capretta echoed these sentiments in an interview last week with the Brunswick Sun.

“This is an exception to the rule,” Capretta said. “We are stopping treats for kids because of this COVID thing. If (City Manager Carl DeForest) isn’t going to put his name on (the permit), I’ll put my name on it. We will keep fighting until this lady gets her permit.”

Emotional toll

Compola said Brunswick makes up about 75 percent of her customer base. But the emotional strain of the permit denial, she said, has had at least as much of an impact as the financial loss.

“I will make a full recovery,” she said. “This community and I have really clicked. But I live here, and I can’t even drive out of town to do a private party, or park the truck in my driveway, without breaking a bunch of hearts.

“The kids don’t understand (why Compola is not permitted to stop). It’s had an effect on an emotional level. Yeah, it has really affected me.”

Read more news from the Brunswick Sun.

Source link

Continue Reading

Business

Commercial rent relief program opens but businesses say it will help few

Published

on

By

Commercial landlords can begin applying for a government rent relief program on Monday, but struggling businesses say it will benefit few of them.

The Canada emergency commercial rent assistance (CECRA) program aims to reduce the rent owed by small business tenants by 75 per cent for April, May and June.

Applications are staggered depending on the province where the property owner is located and the number of tenants, beginning Monday with those in Atlantic Canada, British Columbia, Alberta and Quebec, with up to 10 tenants who are eligible for the program.

The rent relief plan, funded jointly with the provinces, provides non-repayable loans to commercial property owners to cover 50 per cent of the monthly cost.

The loans will be forgiven if the property owner agrees to cut the rent by at least 75 per cent for those months and promises not to evict the tenant. The small business tenant must cover the remaining portion of the rent, which would be up to 25 per cent.

To qualify, small business tenants must pay less than $50,000 a month in rent. They also must have experienced a revenue decline of at least 70 per cent from pre-COVID-19 levels or they must have been forced to close down because of pandemic restrictions. Non-profit and charitable organizations are also eligible.

Businesses fear eviction

The Canadian Federation of Independent Business says many small businesses won’t be able to make June rent without more assistance. Through a survey of its members, the organization found that most commercial tenants don’t think they will qualify and don’t think their landlord will participate.

With many fearing eviction, they’re calling on the government to provide direct access to the government portion of the program.

The Canadian Chamber of Commerce announced Monday it is launching a small business relief fund supported by software company Salesforce. It will give 62 small businesses $10,000 grants to pay salaries, buy personal protective equipment, replenish materials or adapt business models to deal with COVID-19.

Applicants that best demonstrate how the funds will help the business, their employees and their communities with economic recovery efforts will get the funding.

Source link

Continue Reading

Trending