The Update Issue: Employers Choose a New Office Reopening Strategy, Shortages, Inflation, COVID Winners and Recovery Losers

Broadway is about a month away from its reopening and revealed last week that entering the theater will require a COVID-19 vaccination... To the great relief of the folks at Disney's (DIS) Broadway division and the producers of the Wizard of Oz-themed musical Wicked, vaccine-ineligible children under 12 can present a recent negative COVID-19 test […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] The Update Issue: Employers Choose a New Office Reopening Strategy, Shortages, Inflation, COVID Winners and Recovery Losers By Berna Barshay [Broadway is about a month away from its reopening]( and revealed last week that entering the theater will require a COVID-19 vaccination... To the great relief of the folks at Disney's (DIS) Broadway division and the producers of the Wizard of Oz-themed musical Wicked, vaccine-ineligible children under 12 can present a recent negative COVID-19 test to attend the theater. The move seemed pretty radical for all of a few days... until yesterday, when New York City announced that vaccination will soon be required at all gyms, indoor restaurants and bars, theaters, and concert venues. NYC's vaccine mandate for most indoor leisure venues felt bold and was a first among cities, but it's rapidly gaining favor with big business... Yesterday, software giant Microsoft (MSFT) announced that vaccination will be required for anyone entering its U.S. offices – not just employees, but vendors and visitors as well. Microsoft joined a growing list of companies putting in vaccination requirements for an office return, including the largest U.S. private sector employer Walmart (WMT), tech titans Alphabet (GOOGL) and Facebook (FB), the world's largest asset manager BlackRock (BLK), and ride-hailing companies Uber (UBER) and Lyft (LYFT). Streaming company Netflix (NFLX) is requiring its non-office employees – namely the casts and crews of all its U.S. productions – to get vaccinated before reporting to the set. Disney is requiring vaccinations from all salaried and non-union hourly workers and is currently negotiating with unions representing other hourly workers. Walmart, Uber, and Lyft limited the vaccination requirement to headquarters staff and other managerial employees only... frontline workers – ironically, the most at risk of contracting COVID-19 – were exempted. One has to wonder if the [labor shortages]( aren't playing into Walmart and the ride-hailing apps' decision to be less restrictive. They're all struggling to stay staffed and might not feel they can afford to alienate any potential workers. The most surprising vaccine mandate of all came from food giant Tyson (TSN), one of the largest poultry and meat processors and owner of the Hillshire Farms and Jimmy Dean brands. The company is requiring vaccination not just for the suits, but for all of its 120,000 employees. Tyson is also offering $200 to every frontline worker who verifies his or her vaccination. The meat industry was probably the first one outside health care to see massive COVID-19 outbreaks at its facilities, so it makes sense Tyson is making this move – quarantined plants are bad for profits. But so far, most of the companies issuing vaccination mandates have been headquartered in deep-blue states like California, New York, and Washington. Interestingly, Tyson is based out of deep-red Arkansas, which also happens to be among the states experiencing one of the worst COVID-19 surges right now. To keep plants open and functioning, Tyson is bucking the trend and making a decision that could prove unpopular locally, despite being in the best interests of its near-term profitability. As regular Empire Financial Daily readers will remember, meat – which Tyson has a huge role in producing – became [one of the first consumer items to experience an extreme shortage]( early in the pandemic. Workers are clustered tightly in meatpacking plants by design... which made plants the perfect breeding ground for the original virus, long before the emergence of the more contagious delta variant. Tyson's vaccination mandate is therefore logical for both the safety of its staff and the avoidance of future meat shortages, as well as for its bottom line. Speaking of shortages, they still exist... One of the areas suffering the worst shortages is furniture. I ordered a sectional couch on Black Friday weekend last year. It was supposed to come in February. It turns out I will be lucky if I see it by the end of September! My experience is far from unique. Simply put, the furniture supply chain is broken. News site Slate spoke to furniture vendors who reported that sofas that would normally come in eight to 10 weeks are now taking as long as 35 weeks to arrive. Some vendors are offering delivery dates as late as September 2022 for furniture ordered today – a mere 13-month wait... The long delays can be attributed to shortages of [labor]( transportation, and raw materials, including foam and lumber. While the [lumber shortage]( is well-known, the foam supply shortfall is a less-publicized problem. Foam production was hit in February, when the Texas power grid failure took down many makers of the chemical propylene oxide, a big ingredient in foam. Also in short supply are components like nuts, bolts, and brackets, with the backlog for many of these items tracing to the Texas power outages. Lack of product is causing furniture retailers to miss sales, including La-Z-Boy (LZB), which disclosed in its February earnings call that it lost $30 million in business because of supply chain disruptions. Meanwhile, supply disruptions are met with spiking demand from Americans who are still focused on nesting and redecorating their homes, even though they have plenty of options for places to go now. It sounds like it will take some time for things to get back to normal, so if you need a couch, brace yourself for a long wait. While I continue my nearly year-long sofa wait, I can console myself with the fact that it could have been worse... Source: Twitter/@OliviaMesser Despite persistent shortages in tons of product categories, one early 'pandemic winner' suffered a dramatic reversal of fortune yesterday... The giant pandemic bump had already largely worn off for shares of consumer-products giant Clorox (CLX) before it reported its fiscal fourth-quarter earnings yesterday, but it nevertheless took its worst tumble in decades... CLX shares were down almost 10% yesterday as the company missed revenue estimates by more than $100 million. Sales fell 9% versus the prior year, when finding a container of Clorox wipes constituted a minor miracle. The company guided for sales to contract by 2% to 6% in its fiscal year 2022, which runs through June. Other than toilet paper, [nothing stood for early pandemic shortages more than Clorox](. The company had said as recently as March that it expected demand to remain "sticky" from all the customers it picked up during the pandemic... but that clearly did not turn out to be the case. As bleak as it was on the revenue front for Clorox – which also makes Kingsford charcoal, Brita water filters, and Glad trash bags – it was even uglier on the earnings front. Clorox reported earnings per share ("EPS") of $0.95, well short of the $1.32 analysts were looking for and a 61% drop from last year's record fourth quarter. One would expect the EPS drop to be larger than the revenue drop at a company like Clorox, as it deleverages some fixed costs... but that wasn't the only thing going on here. Yesterday, Clorox became the latest in a string of inflation-related casualties within the consumer-packaged goods ("CPG") sector. CPG companies have been taking a big hit from the severe inflation affecting what it costs to manufacture and ship their products... They generally haven't been able to pass on rising costs in prices. Toilet-paper maker Kimberly-Clark (KMB) was another CPG player to miss revenue and EPS estimates this quarter. Clearly, the pandemic winners have turned into recovery losers. This is particularly prevalent in CPG, where hoarding was abundant last spring. While many companies are experiencing the easiest comps of their corporate history, since 2020's second-quarter shutdowns severely depressed results, companies like Clorox and Kimberly-Clark were killing it last year, but apparently not in a sustainable way. It's Murphy's Law that just as demand starts to go off a cliff for these COVID winners, they are slammed with rising costs and little pricing power, always a bad combo. I think Clorox probably kitchen-sinked its guidance for the 2022 year and could become an interesting buy at some point... but not just yet. --------------------------------------------------------------- Recommended Links: [Do This BEFORE You Go Back to the Office]( He predicted the coronavirus crash a month early... He called the bottom of the crash too, on March 16. Now, America's top "stock cop" has an urgent warning for all Americans: "[Do this BEFORE you head back to the office]( --------------------------------------------------------------- [Here's the exact day stocks will crash in 2021]( Stocks are going haywire, and a small group of investors just got advance notice of a major shift coming to the financial markets. If you have ANY money in stocks right now, [this changes everything](. --------------------------------------------------------------- Even Amazon (AMZN) couldn't buck the trend of 'COVID winners' selling off on growth deceleration... Amazon posted a rare revenue miss last week, with results $2 billion short of analyst estimates... a less-than-2% topline miss. Amazon also gave a weaker-than-expected outlook for third-quarter topline growth of just 10% to 16%, citing tough comps as its e-commerce business exploded last year because of the pandemic. Even though Amazon handily beat earnings, with EPS of $15.12 versus estimates of $12.30... the stock fell more than 7% the day after reporting. The earnings beat was due to a mix shift to the company's higher margin cloud-computing and advertising businesses, both of which continue to accelerate. The slowdown in Amazon's e-commerce division shouldn't have been a surprise... Companies both large and small with operations online have been sharing anecdotes of an online slowdown ever since the reopening fully took hold. People are eager to get out of the house, and shopping in-store is one of the things they want to return to. The back-to-school shopping season is in full swing... and a poll out this week from data intelligence company Morning Consult shows that consumers are eager to get back to pre-COVID in-person shopping habits... Source: Morning Consult Tough comps will remain a headwind for Amazon's e-commerce division, but the quarterly results were bullish for growth acceleration at Amazon Web Services ("AWS") and its advertising business, both of which carry margins much higher than its retail operations. AMZN shares are a buy here, and the post-earnings sell-off is offering an attractive entry point. In a post script to [a recent essay on labor shortages and wage inflation]( one Wall Street titan backed down on its promise to hold the line on analyst pay... Bloomberg reported on Monday that investment bank Goldman Sachs (GS) capitulated and raised pay for its first-year analysts. Junior bankers fresh out of college will now earn at least $110,000 in their first year and $125,000 in their second, putting them on par with their peers at other banks. Nice work if you can get it... and withstand the 100-hour work weeks that first-year Goldman analysts have been complaining about to company management and online. Source: twitter.com/@litcapital Finally, one quick note... Time is running out to join the Empire Financial Partnership, where you can receive everything we publish now and in the future – for life – without paying a single subscription fee again. This year alone, we've launched Enrique's Empire Elite Options trading service and my Empire Market Insider advisory... and Enrique is quietly working on another exciting product that is currently available only to Empire Financial Partners until it officially launches. I'm proud to be a part of what we're building at Empire, and we're just getting started. With all of the new products we're launching, I'm told that the price of the Partnership will be going up significantly at the end of the year... so this could be your last chance to get in before the price goes up. My colleague Whitney Tilson put together a presentation explaining all of the benefits, which you can view for the next few days by [clicking here](. In the mailbag, readers weigh in on inflation, trading app Robinhood (HOOD), and initial public offerings ('IPOs')... What shortages are you experiencing in your daily life? Are you using fewer cleaning products now versus a year ago? Are you using more cleaning supplies than two years ago... or has your usage normalized? If you are back-to-school shopping this year, where are you doing it? Online or offline? Which stores or web sites? Share your thoughts in an e-mail to feedback@empirefinancialresearch.com. "Berna, I wrote a response to this earlier but didn't hear back. Encouraging inflation combined with zero interest rates is a disaster for the millions of retirees who have little or no indexing to CPI [Consumer Price Index] changes and who live largely off their assets, with deposit rates nonexistent. I'm surprised this issue is getting so little attention. Borrowers are getting bailed out at the great expense of savers." – Rob M. Berna comment: Rob, I agree with your point about retirees... Ultra-low interest rates have been a problem for people living on a fixed income for more than a decade now, and that was before inflation kicked in, making it worse. Policymakers are juggling several competing priorities here. "While I am appalled that Robinhood was permitted to go public, it seems that the Securities and Exchange Commission ('SEC') needs to step up now and perhaps impose some new rules to address what appears to be a business model whose goal is to take advantage of naive investors. Perhaps they could start by requiring Robinhood, and similar firms, clearly state how they make money AND how their business model is different from Schwab (SCHW), Fidelity, etc. Wouldn't that be interesting?" – Ramona R. Berna comment: With you 100% on this one, Ramona. "Hi Berna, In your essay on Robinhood, you did not mention one of my favorite IPOs of all time. Boston Beer (SAM) allowed its customers the opportunity to buy shares in the IPO. A certificate was included in the six packs of Sam Adams and lucky customers were offered the opportunity to get 33 shares at $15. I was fortunate enough to be selected. The shares fared poorly for a few years after the IPO, but those who just relaxed and enjoyed their favorite beverage with patience have been rewarded; up 45x overall since the 1995 IPO... and shares were up as much as 89x (8899%) before recent troubles with their Truly seltzer brand hit the stock. "I am also fond of Travelzoo (TZOO) and its CEO Ralph Bartel. That company literally gave free shares to its e-mail subscribers back in the late 90s. It went on to become a meme stock long before it was cool to be a meme stock and subscribers to the e-mail list could've cashed in for more than $2,000 on the free shares a few years later. Those shares today would be worth about $280. My calculator won't divide by zero to give me my rate of return on that one. "Keep up the great work. I always enjoy reading your well thought out essays. "Cheers." – Dennis F Berna comment: Thank you, Dennis, and those are great IPO stories! Regards, Berna Barshay August 4, 2021 If someone forwarded you this e-mail and you would like to be added to my e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2021 Empire Financial Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Empire Financial Research, 601 Lexington Ave., 20th Floor, New York, NY 10022 [www.empirefinancialresearch.com.]( You received this e-mail because you are subscribed to Empire Financial Daily. [Unsubscribe from all future e-mails](