When we look back at the pandemic and what it did in the last three months, we will see something that resembles almost a wholesale revolution in our service-based economy: The big got bigger and the small got snuffed.
It's terrific to talk about all the inventive ways companies survived, how old brands such as those managed by Conagra (CAG) or Campbell Soup (CPB) or Clorox (CLX) made a super comeback. But we have to say a word about those left behind, because they, without help from the government, will be on life support and will ultimately wither and die if we don't get a vaccine soon.
First, let's talk restaurants. These are precarious institutions to begin with, running on very little money in the till and not much cushion. Our country has given restaurateurs a savvy way to stay in business for a short time: The Paycheck Protection loan that's forgiven if you stay open. There's only one problem: It comes to an end soon and when that happens, most restaurants will try to give it a go for a little bit, but it will be well-nigh impossible to make enough money to cover the bills, unless it's a labor of love, as is the case with Bar San Miguel and the Longshoreman, the two Brooklyn places I own and co-own.
It's because of my skin in the game that I know what's really going on. The quick-serve restaurants have the ability to take out and deliver, helped by the strength of Grubhub (GRUB) , Doordash, Uber (UBER) and Postmates, which may combine with Uber or go public. But the only sit-down restaurants that can survive are the ones that have enough space that they can lose half their tables and still have enough money coming in to survive. That's how grueling these social distancing rules are. And when we don't obey them, we get what's happened to people at the crowded bars of Texas, Arizona and Florida.
There' simply nothing that can be done. The costs stay the same: labor, food, rent, delivery. But the crowd's cut in half.
So, welcome to a new world where there are a fraction of restaurants and even bars than there has been, truly a sad state for about 13 million workers and all of us who dine out. If the government doesn't, say, pay these companies' collective rents until we get a vaccine, they will most likely not make it ... to the promised land. Sure, there is outside ingenuity, such a banning parking in front of restaurants to add tables, but that will only last until it gets too cold to stand it, which will happen in much of the country.
We know that retailers are frantically trying to reinvent themselves, but for the most part, many of the larger ones can't. Governments deemed a handful of stores that were fortunate enough to sell groceries, namely, Walmart (WMT) , Costco (COST) , Target (TGT) and the dollar stores as essential services. Now, you can shop at other stores, such as mall stores, but I think the damage has been done. Without a healthy omnichannel, like a Williams-Sonoma (WSM) , you got "essential serviced" out of business. You can say that this was inevitable, anyway. I come back and say, tell that to the millions of people who worked at these retailers that don't make it, and few will.
There's also a whole category of businesses that can't meet the new restrictions in place until we get a vaccine. Take the health clubs. The rules for reopening again favor the big chains, because of the capital commitment needed to ensure that guests and trainers don't infect each other.
We are also likely to lose the whole ecosystem of stores and restaurants built around sport events. I don't know if any movie theatres will be able to survive if they can't pack the house on the big openings. Again, the ecosystem could disappear.
And then there's Amazon (AMZN) . When the pandemic began and we had to shelter in place, we had little choice but to go to Amazon for just about everything. Going to the drug store on the way home, going to pick up some incidentals, forget about it. Unless you needed them today, like you get at Target or Walmart, you could wait until Amazon brought them to you. I know it didn't set out like that, but Amazon was made for a pandemic. Almost nobody else was.
Life will not be the same. There will not be the diversity, there will not be the liveliness, particularly in urban neighborhoods, and there will not be the jobs, the millions of jobs lost simply because you must keep your distance to survive until we get the vaccine -- unless you have a giant balance sheet, something that smaller independents don't have and will never get the chance to do so.
(AMZN, COST and CLX are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
