For months the coronavirus pandemic has shuttered businesses, and while many have been able to persevere through the storm, some are unlikely to make it out of this crisis alive.
Certain sectors have been directly hit by coronavirus shutdowns, including in-person entertainment, nightlife, real estate, and the travel industry. Accordingly, companies like Airbnb, WeWork, AMC Theaters, Dave & Busters, and airline wifi giant Gogo have taken a direct hit from the catastrophe.
But less-obvious victims of the pandemic include those companies that were already on unsteady footing before the crisis. While brands that were stable and successful pre-pandemic may be able to bounce back, our present crisis could be the final nail in the coffin for companies that were already struggling.
Here are a few companies whose recent performance will make surviving the pandemic difficult.
StubHub, which facilitates online sale of event tickets, has been predictably crippled by national shut-downs. Live, in-person events of all types have been cancelled in the face of Covid-19 and travel restrictions have meant fewer tourists are buying tickets for out-of-town shows.
But StubHub’s longest-term damage could result from its horrendous mishandling of cancellations amid the crisis.
After over 20,000 events were cancelled, StubHub changed its refund policy to stop financial hemorrhaging. StubHub President Sukhinder Singh Cassidy said the company could not “take the risk of giving refunds to buyers before recouping the same refund from the seller,” meaning hundreds of thousands of people were not be refunded for canceled sporting events or concerts.
StubHub now faces a slew of lawsuits for breaking its prior agreement to refund customers for canceled events.
While a decline in sales during the pandemic could be remedied in the future, it’s going to be a lot harder for StubHub to win back the trust of its customers. And the financial and PR fallout for the company doesn’t end there. StubHub has since furloughed almost all of its employees, and a $4 billion buyout by Viagogo has been frozen.
The clothing industry has seen decreased demand amid the pandemic as Americans by-and-large chose to spend their money on essential goods. As restrictions ease across the country, some retail brands will be able to rebound from this momentary challenge. But J. Crew remains in a precarious position.
To understand the cause of the national franchise’s pain, look no further than the sass-masters of Twitter:
“Bummed about J.Crew because where else am I gonna find a $145 sun dress with grapefruits on it?” one tweeter quipped.
“The reason behind J.Crew’s bankruptcy filing is simple: people either want to pay $1,000 for a garment, or they wanna pay $10,” posted another Twitter user, who happens to be a style writer from GQ. And therein lies the long-term issue of J.Crew’s pricing model: it’s unclear who it’s designed for.
Compare it for a moment to Neiman Marcus, which also filed for bankruptcy this year. Across financial news sources, predictions of Neiman’s demise have been long in the making. But the high-end department store benefits from the fact that luxury goods have a fairly inelastic demand, meaning that a price change will not necessarily change how many people are willing to pay for it. For instance, if a person has $3,000 to spend on a dress, they won’t care that much if the price inflates to $4,000, because they are simply looking to spend a lot of money. At the end of the day, Neiman Marcus is selling the idea of luxury and it’s possible that when the pandemic passes, consumers who want to show off their wealth might return to such an indulgent market.
On the other hand, J. Crew sits in an uncomfortable middle-ground. The people who can afford to spend hundreds on one article of daywear clothing will not be attracted to the relatively cheap quality of J. Crew’s products. Over the last decade, there has been a shift toward small-batch and customizable goods in the luxury market. J. Crew, with its mass-produced apparel pieces, does not fit that ticket. And yet, the store’s prices are still too expensive for the average consumer, turning off both luxury buyers and frugal shoppers.
On March 16, J. Crew declared one of the first major bankruptcies of the Covid-19 era, the result of horrible pre-existing debt. Now, if it wants people to continue shopping at its stores, J. Crew is going to need to slash prices and entice a much wider consumer base. But its current financial situation might not allow for such a change, which means this could be the end of J. Crew.
Victoria’s Secret was already on the back foot coming into 2020, having closed over 50 of its stores last year. Parent company L Brands planned to shed the lingerie brand, but the deal they had recently fell through, supposedly because the potential buyer disapproved of the company’s handling of the coronavirus pandemic. L Brands is now looking to rid itself of Victoria’s Secret by any means possible, including a buyout or a public offering.
Once a nationally-celebrated franchise with a recognizable image and a knack for churning out supermodels, Victoria’s Secret’s sexy and salacious marketing strategy has not aged well in the post-MeToo era. Its first quarter report depicted a horrible three months for the company, falling 46% year over year, with revenue down 37% and an incurred loss of $300 million.
L Brands has said that it “remains committed to establishing Bath & Body Works as a pure-play public company,” referring to its other major subsidiary, and added it is “taking the necessary steps to prepare the Victoria’s Secret Lingerie, Victoria’s Secret Beauty and PINK businesses to operate as a separate, stand-alone company.” But L Brands can’t seem to find anyone to buy this huge liability of a company.