New York (CNN Business)Businesses will need to put in place new safety measures to combat the spread of the coronavirus pandemic. That will change how companies, employees, customers and the government interact with one another. And it will cost the private sector — and the customers they serve — a pretty penny.
Companies will have to invest heavily in safety measures and new protocols, in many cases changing the way they operate. That will leave less money to invest in growth and paying down debts, according to a new report from ratings agency Moody’s.Not all sectors will have to adapt in the same way. But offices, for example, will all have to make drastic changes. They will have to be virus-safe for the full workforce to return, which will require companies to spend money on upgrading their technology and capabilities. Even employees outside of infection hotspots will expect a certain degree of safety measures.
For retailers, the pandemic has accelerated America’s shift to e-commerce. Online shopping boomed during the spring lockdown and consumers concerned about safety will probably continue their habit even as shops reopen. This means companies will have to update sales approaches, supply chains and operating strategies.Retailers are struggling with different aspects of the pandemic. Although some don’t have enough demand, others struggle to stem the tide. Amazon and Walmart, for example, announced they would hire hundreds of thousands of workers to keep up with heightened demand.Read MoreAll this means spending more money that will weigh on profits and balance sheets. Many of those costs will be passed along to the customer.More people shopping online will also hurt the real estate sector and lower commercial property values. Physical stores will continue to close — dozens of traditional retailers have gone bankrupt this year.All of these changes will affect corporate credit ratings as well, Moody’s said.
Lower profit margins and higher costs, as well as weaker growth prospects during the years of recovery and a slower pace of repaying of debt, will weigh on companies’ creditworthiness.So far, and unsurprisingly, Moody’s has downgraded the highest number of credit ratings in the sectors that have been hit the hardest by the pandemic. That includes the leisure industry, complete with cruise lines and restaurants, as well as airlines, shipping, autos, gaming, retail and export-oriented manufacturing. For firms in these industries, business as usual has changed dramatically.
Source: edition.cnn.com