Some large companies that thrived at the height of the corona plague are reporting a slowdown in growth, indicating that many customers are returning to the behavioral patterns that characterized them before the outbreak of the plague.
In the package delivery service UPS They said they sent fewer packages than a year ago and warned of slow growth later in the year, an announcement that caused a 10% drop in the company’s stock price. Disinfectant maker Liesol and Detol Soaps said sales of the products fell more than a third in the U.S. since March. Soup maker Campbell Soup reported last month that sales fell 21 percent in the last quarter, a one.year change earlier, as foodmakers struggled to keep pace with demand. Of Americans who were in a panic to fill the pantry.
Meanwhile, 3M is cutting back on the global product of N95 masks the company makes and expects sales of the product that was once hard to come by will plummet as the rate of immunization slows down the spread of the corona.
Sales of many of these companies have remained strong and the threat of the Corona Delta strain may further lead to the imposition of new restrictions of the kind that have led to an increase in demand for their products. The Centers for Disease Prevention and Control (CDC) on Tuesday recommended that vaccinated people continue to wear masks in enclosed public spaces in areas where there is a high chance of contracting corona.
Still, the prospect of shrinking growth adds to the pressure on these companies as they deal with inflation in prices and supply chain problems. Unlike at the height of the epidemic, when high growth alleviated the impact of the shortage of epidemic.related products and challenges, these companies were losing their relative advantage.
“Seeing a change in behavior”
The slowdowns are an early answer to one of the biggest epidemic questions: How long will the behavioral changes caused by the closures and the virus last?
“We are seeing a change in behavior,” said Lakshman Nersimhan, CEO of Liesol maker Reckitt Benckiser Group, about demand for hygiene products. “What we saw in the second quarter, especially in the U.S., was leftovers that were higher than we thought.“
At UPS, the average daily shipping volume fell 0.8 percent in the second quarter worldwide and 2.9 percent in the U.S. compared to last year’s data, with extensive closures leaving consumers in homes and moving everything from toilet paper to toothpaste to the Internet. It was the first time that the quarterly shipping volume had decreased since the beginning of 2011.
“A lot of our customers in regular stores reopened the stores and as the economy reopened, they went back to them,” UPS CEO Carol Toma said Tuesday.
The company reported a jump of about 15% in sales and higher profits, partly as a result of demanding more money and being more picky about the customers it agreed to work with and the type of products it agreed to ship.
Still, slower growth forecasts led to massive stock sales on Tuesday. At the same time, UPS shares have risen more than 13% since the beginning of the year.
At 3M, the largest American manufacturer of N95 masks, they said their sales fell 11% in the second quarter compared to the previous quarter, when hospitalizations due to the disease fell in number. The company, headquartered in St. Paul, Minnesota, said mask sales could drop as much as $ 300 million in the second half of the year compared to the same period last year.
N95 masks, which at the time of the plague were used by health care workers and customers alike, remained rare and difficult to obtain throughout the past year. Hospitals have resorted to reusing protective equipment as a matter of routine and in many cases have given doctors and nurses one mask on duty.
At 3M, production increased in January 2020 when the virus began to spread in China. By January this year, the company had produced masks at a rate of 2.5 billion masks per year, four times the 2019 level.
“We see that demand is really changing as the corona develops,” said 3M CEO Mike Roman. “We are at the beginning of the process of starting to slow down production.“
For some of the companies whose businesses have benefited from changes caused by the plague, the slowdown is not the only problem. American companies in all fields are paying more for goods, transportation and manpower while corona outbreaks around the world along supply lines have hit shipments of everything from mobile phones to running shorts. Many companies raise product prices to balance soaring production costs, which examines how hungry customers are to pay more for products, including food, cars and shampoos.
Price pressures pose a threat to the rehabilitation of restaurants, sellers and other industries that have been severely damaged and are now benefiting from the easing of restrictions and the resumption of normal behavior among consumers. For companies that have “taken a hit” due to the unusual behavior of customers, the current conditions are a double whammy.
Reckit Bensicker said in addition to declining demand for disinfectant products, which Narasimhan said would probably peak in the U.S. in February, the company is facing a rise in commodity prices like plastic and paper and higher shipping costs. 2.9% to a level of 21.6%.
“Inflation has intensified in the second quarter, and it will take time to balance that domestic wind,” Narasimhan said. In Reckit, the one.year marginal directive was lowered in full, a step similar to the one taken by food giant Unilever last week. As early as last week, Kimberly.Clark reported results that fell short of expectations due to higher costs and shrinking demand for “Scott” toilet paper it produces. All three companies have raised the price of some of the products in order to balance higher production costs. On the London Stock Exchange, Reckit’s shares fell close to 9%.
Nick Kostov participated in the preparation of the article.