Capital One Financial Corp., potentially setting a standard for the U.S. financial industry, plans to keep most employees working at home at least four more months as it waits for the coronavirus pandemic to ebb.
The lender’s offices in the U.S., Canada and the U.K. will remain shut to all non-essential staff at least through the Labor Day holiday on Sept. 7, Chief Executive Officer Richard Fairbank wrote in an internal memo. He promised employees that the McLean, Virginia-based firm will give them at least six weeks’ notice once it decides to reopen those sites.
That’s one of the strongest signs yet that legions of industry employees using makeshift work stations at home may have to wait much longer to return to their offices, even as many states begin lifting restrictions on public life. Capital One, which earns most of its revenue from its massive credit card business, said in late March it had more than 40,000 people doing their jobs remotely online, accounting for more than three-quarters of its workforce.
Many major financial firms have yet to publicly set dates for reopening offices as they grapple with numerous challenges, such as how to help employees safely commute, ascend elevators and navigate shared workspaces. And those that have weighed in on the topic have expressed caution. At Citigroup Inc., for example, President Jane Fraser said last month that the firm will conduct its own analysis of risks and won’t necessarily reopen offices just because local authorities issue all-clears.
Goldman Sachs Group Inc. executives told employees on Tuesday the firm is “carefully thinking about a gradual ‘return to office’ framework” for operations around the world, noting staff in Hong Kong, mainland China, Stockholm and Tel Aviv have started going back. Credit Suisse Group AG employees were told to expect to return in four phases.
Gold’s Gym International, Dallas, filed for Chapter 11 on May 4 as a way to financially restructure the company after the worldwide shutdown of businesses from the COVID-19 pandemic affected the company, CEO Adam Zeitsiff shared with Club Industry.
The filing is for the corporate entity and does not involve franchisees, who make up the majority of Gold’s Gym locations, Zeitsiff said. He expects the company will emerge from Chapter 11 by Aug. 1, if not sooner.
“We are filing this to restructure the company, and this is strictly as a result of the pandemic,” Zeitsiff told Club Industry. “We were on a massive turnaround. We were refranchising stores, awarding company-owned stores to franchisees. We were all over the place growing our business. We were ahead of plan for the year. And then COVID-19 hit, and this is simply our way of acting swiftly to ensure we have a long-term viable and sustainable business.”
In fact, Gold’s Gym International had just come off its strongest year of worldwide growth in company history, finalizing 22 American franchise agreements and opening 35 locations in 2019, the latter of which was a company record, the company shared in January. In early March prior to the COVID-19 shutdowns, Gold’s Gym refranchised 24 locations in the Washington, D.C., area and refranchised two locations in Los Angeles and eight in Tennessee.
But the COVID-19 pandemic caused Gold’s Gym International to temporarily close all of its company-owned gyms on March 16. That week, it froze membership dues at its company-owned clubs, and that month it also furloughed 98 percent of employees at company-owned gyms.
Zeitsiff declined to share how much money the closures have cost Gold’s Gym, but during this time, the company has brought in no membership revenues, royalty revenue or other revenue, except minimal revenue from licensed apparel, products and consumables.
The list keeps piling up, according to this recent CNN report Pier 1 Imports is closing 450 stores, the pain doesn’t just stop at the store level, Pier 1 announced its also shutting down distribution centers and dumping 40% of their corporate staff in an effort to better align its business with the current operating environment.
Pier 1 Imports will close nearly half of its stores and is reportedly nearing a bankruptcy filing.
The home goods retailer has been struggling for years against rising pressure online and from big-box rivals. Its stock, which was at $300 a share in 2015, is trading at around $5 today.
Pier 1 shares tumbled nearly 17% Monday. after Bloomberg reported the news of a potential bankruptcy.
Pier 1 operated 942 stores in the United States and Canada at the end of its latest quarter. It said Monday that it will close up to 450 stores “in order to better align its business with the current operating environment.” Pier 1 will also close distribution centers and lay off corporate employees.
While Walmart is finding strength in grocery, Target is finding it in apparel.
The retailer said the apparel category reaped the most “dramatic” market share gains in the latest quarter, when it reported earnings on Wednesday. It said apparel sales were up more than 10%, which also helped strengthen Target’s profit margins.
Clearly, Target’s efforts to get back to being known as “cheap chic” are working.
In the fashion department, it has refreshed stores to make individual brands look more like their own mini boutiques, with more mannequins and table displays showing off merchandise. It has launched dozens of in-house apparel brands over the past three years, such as “A New Day” for women, “Auden” for lingerie and Goodfellow & Co. for men. They’re all reasonably priced, with guys’ winter sweaters selling for under $30 and a women’s party skirt for $27.99.
Notably, Target is succeeding at a time when others are struggling to sell clothes.
Teen apparel retailer Forever 21 has filed for bankruptcy. And Kohl’s, when it reported earnings Tuesday, said women’s apparel was its weakest category during the period. Gap’s brands, including what had been its fast-growing Old Navy label, are struggling. Dressbarn is wrapping up liquidation sales at its remaining stores. Amazon keeps trying to grow in fashion but has struggled to persuade shoppers to buy more than basic apparel from its site.
“I think our commitment to our new store operating model, where we have dedicated business owners in that apparel category … is really driving great results,” Target CEO Brian Cornell said on a post-earnings call with analysts. “The combination of the work we’ve done with our own brand assortment, adding some new national brands like Levi’s in select stores, the service that we’re delivering in store, and the inspiration we’re creating online has really come together.”
At no point has the cable industry or its executives been particularly keyed in to the “cord cutting” threat. As streaming video has chipped away at their subscriber bases, most cable giants like Spectrum and Comcast have responded by raising prices. And when confronted by growing evidence that cord cutting (defined as cutting the TV cord but keeping broadband) was a growing trend, most of these same executives spent years first denying cord cutting was happening, then trying to claim the only people doing so were lame man-children living in their moms’ basements.
Charter CEO Tom Rutledge was a key part of this cable executive myopia, both failing to see the trend coming, then failing utterly to respond to it in any meaningful way. The result: Charter has been losing subscribers for years, last quarter losing 75,000 cable TV customers. That’s not as bad as the 1.36 million pay TV customers lost by AT&T in the same period, but it’s not what you’d advertise as “good,” either.
Having no meaningful reputation on this subject to stand on, Rutledge last week tried to insist that the threat of users cancelling bloated, costly pay TV bundles and moving to streaming was a phenomenon that would soon slow down:
“I think in aggregate they’re going to slow down,” said Rutledge. “Because I think most single-family homes have big TVs in them and that’s where you get sports, that’s where you get news, that’s where you get live TV like this. It’s still going to be under price pressure. I’m not saying the category isn’t under pressure. But I think the rate of decline will slow.”
But there’s no actual evidence to support that conclusion. Cord cutting has only been accelerating and breaking records throughout 2019. And with a number of high profile streaming alternatives like Disney+ and Apple TV+ having launched this month, there’s absolutely no indication that trend is going to change. That’s something being made clear at research firms like UBS, which is actually predicting that things will be getting slightly better for AT&T, and marginally worse for cable giants like Charter:
“For psychopaths, it [corporate success] is a game and they don’t mind if they violate morals. It is about getting where they want in the company and having dominance over others.”
The global financial crisis in 2008 has prompted researchers to study workplace traits that may have allowed a corporate culture in which unethical behaviour was able to flourish.
Mr Brooks’s research, conducted with a colleague from Australia’s Bond University and a researcher from the University of San Diego, was based on a study of corporate professionals in the supply chain management industry across the US.
The findings, presented on Tuesday at the Australian Psychological Society Congress in Melbourne, are due to be published in the European Journal of Psychology.
The researchers have been examining ways to help employers screen for potential psychopaths.
“We hope to implement our screening tool in businesses so that there’s an adequate assessment to hopefully identify this problem – to stop people sneaking through into positions in the business that can become very costly,” Mr Brooks said.
Disney announced today that Disney+ has reached a stunning 10 million plus subscribers just 24 hours after its launch yesterday in the U.S., Canada, and Netherlands; the figure surprised analysts who had expected a much slower rollout for Disney to reach that level, although let’s just ignore that most of the new “subs” are only there thanks to one of the various free streaming offers (perhaps someone should launch WeStream).
Separately, Apptopia reported 3.2 million mobile app downloads in the first 24 hours, with an estimated 89% of mobile downloads in the U.S., 9% in Canada, and 2% in the Netherlands. In just one day, users spent 1.3 million hours watching it, Apptopia said, more than Amazon.com Inc.’s Prime Video, but far less than the 6 million hours watched on Netflix.
“Disney should silence naysayers who expressed reservations about a pivot to streaming,” said Geetha Ranganathan, a media analyst for Bloomberg Intelligence. “It took HBO Now about four years to reach about 10 million streaming subscribers.”
That’s just the beginning: on Nov. 19, Disney+ will launch in Australia, New Zealand, and Puerto Rico (Puerto Rico’s launch was delayed one week) and will launch in Western Europe on March 31, 2020. While the service experienced first day technical glitches, this was likely due to high consumer demand which was ahead of management’s expectations and not structural issues with the app.
At this fervent adoption rate, Disney could hit its target of 60 million to 90 million worldwide subscribers in just months, if not weeks, and certainly well before the company’s original 2024 goal, according to Wedbush Securities analyst Dan Ives. This, of course is bad news for legacy streamers such as Netflix, which could see as many as 10% of its customers lured away to rival services such as Disney+ and one from Apple that launched earlier this month.
Commenting on Disney’s stunning disclosure, JPM said that the steep ramp reflects a philosophy of “initial subscribers now; pricing later.” Disney’s willingness to debut its content-rich service at an attractive price point is leading to massive subscriber growth which will likely lead to pricing power later. To be sure, JPM noted questions arise regarding the ARPU despite the strong ramp in subs, including:
subscribers opting-in to the Verizon deal for a free year of Disney+ from a potential opportunity of ~17-19m eligible Verizon customers;
subscribers to the bundle with ESPN+ and ad-supported Hulu; and
subscriber churn following the free seven-day trial. Overall, we are positive on the read-through for subscriber growth at ESPN+ and adsupported Hulu as the combination at $12.99/month is a compelling deal.
Even so, the bank pointed out that “the announcement surpasses our expectations for 5m subs in the first quarter; we now expect 15m subscribers in FQ120 and bump up our full year expectations from 15m to 25m.”
Separately, Disney clinched important last minute deals for its content. Ahead of the Disney+ launch, Disney started to remove on-demand content for cable customers, in our view to create heightened demand for the content and the product.
As a result, nearly all Marvel movies are available to stream in the U.S., including Avengers: Endgame (initially expected to stream on Dec. 11) as Disney struck some last-minute rights deals. Four Marvel films will remain on Netflix through the end of 2019 (Black Panther, Ant-Man and the Wasp, Avengers: Infinity War, and Thor: Ragnarok) and will stream on Disney+ in 2020.
As an aside, JPM analyst Alexia Quadrani noted that she was impressed by the content and user experience of Disney+ upon launch: “The recommendations, originals tab, as well as different collections under the search tab make it very easy to navigate through content and find what one is looking for. We did experience some technical issues on launch day, which we think is due to strong demand and not any underlying issues given the service has been in beta for months in the Netherlands.”
Not surprisingly, DIS stock exploded higher on the announcement, climbing as much as 6.8% on Wednesday, its biggest intraday rally in seventh months, and hitting a new all time high.
Netflix shares tumbled 3.7% as its company’s investors assess how big a threat Disney+ will be.
Finally, for those curious, yesterday we showed a full breakdown of which video streaming service is showing what exclusive content; we recreate it below.