American companies are thriving despite the pandemic – or because of it

Nearly two years after the coronavirus pandemic halted much of the US economy, public companies are recording some of their best economic results ever.

Profit growth is strong. Most companies’ sales are higher than where they were before Covid-19 – often well above. The liquidity crisis many feared in 2020 was never realized, leaving companies with significant cash cushions. The stock market ended 2021 near record highs and far fewer public companies filed for bankruptcy in 2021 than in the years before the pandemic.

“At the start of the pandemic, if you asked us to look ahead, I do not think we would have expected this result,” said Brian Kloss, a portfolio manager for Brandywine Global, a unit of Franklin Resources Inc.

which manages around $ 67 billion in assets. “This has been very different from any other cycle we have seen.”[ads1];

Government programs provided funding to businesses, helping them retain workers, while increasing unemployment benefits and direct consumer assistance also kept incomes up, said Kathy Bostjancic, a US financial economist at Oxford Economics.

“Household support was higher than before, so it really helped increase consumption,” she said. “That is what led to revenue growth and profits.”

The rise is real for smaller companies, but it is the largest companies that have performed best, shows a Wall Street Journal analysis of the company’s financial data. For companies with large capital in the S&P 500 index, profits and income were less damaged by the pandemic’s initial economic downturn. The largest companies also recovered faster than the smaller ones, although the uncertainty deepened over the Covid-19 infection rate and the spread of variants, rising inflation and supply chain problems.

“The larger companies are able to navigate supply chain issues much more easily,” Bostjancic said. “They have scale and extra resources that medium and small businesses will find more difficult.”


Companies in the S&P 500 range from the clothing retailer Gap Inc.,

with a market value of around $ 6.6 billion, to Apple Inc.,

which rose to a market value of nearly $ 3 trillion. The median S&P 400 midcap company has a market value of around 5.7 billion dollars, while the median S&P 600 small cap has a value of 1.6 billion dollars, data from S&P Global Market Intelligence shows.

Total sales for all three groups in the last reported quarter are up from the comparable period in 2019 – and profit growth has been even stronger, data from Refinitiv shows.

Apple Inc. has seen the market value increase to almost $ 3 trillion.


Bridget Bennett for The Wall Street Journal

Within these groups, of course, the results vary widely. If we look at the last 12 months with reported finances, sales to a third of the small companies are still after the 2019 levels, according to data from S&P Global Market Intelligence. Medium and large companies were more likely to have surpassed this reference.

Sale at beauty equipment retailer Ulta Beauty Inc.

has risen 12% during the 12 months ending this autumn compared to 2019 levels. In 2020, the company had to close many of its stores for several weeks at a time and focus more intensively on online operations, said CFO Scott Settersten.

Ulta emphasized self-care products rather than make-up and augmented reality features and a program to let customers pick up online orders outside their stores, he said. Personal sales returned quickly after the stores reopened this summer, and accounted for 70% of sales for the whole of 2020, and have remained strong. Profit margins have also declined, to 10.7% during the 12 months ended this autumn, from 3.6% in the same period in 2020 and 9.7% in 2019, S&P data show.

“The results in 2021 have been extraordinary regardless of goals,” said Settersten. “People are coming back to the stores, but they are also continuing to shop digitally.”

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Even some companies that have taken back still feel squeezed. Brinks Co.

, in S & P’s midcap index, made fewer stops with its iconic armored trucks, and recorded a 25% drop in revenue as the pandemic led to companies shutting down or downsizing in April 2020, said CFO Ron Domanico.

In 2021, sales in these industries came, and grew around 3% in the quarter, until the Delta variant slowed growth to around 1% in the quarter this autumn, Domanico said. Revenue has returned to around 96% of pre-pandemic levels, and the company does not expect a full recovery until later in 2022.


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Brink’s has more than compensated for the decline in its pre-pandemic operations with a number of acquisitions since early 2020. But the company’s costs also increase with inflation and labor shortages.

“Just reading the tea leaves with what we’ve seen about inflation, I expect there will be another round of wage increases,” Mr. Domanico added. “And with our thin margins, we have to pass it on with price increases.”

Profit margins

Overall, 12-month profit margins have increased for public companies since the end of 2019, even in the midst of rising costs and subsequent price increases. Here, too, larger companies do better.

Profit margins with large companies have long surpassed the smaller companies. The decline in margins in 2020 was stronger for smaller companies as a group than for larger ones. The larger companies have also had stronger margin growth in the last two years than small companies.

The pandemic helped some businesses, sometimes in surprising ways. At the water meter manufacturer Badger Meter Inc.,

as a member of the S&P 600 index, revenues initially fell sharply in both supply and commercial divisions with the outbreak of the pandemic.

But sales to utilities picked up next quarter, growing overall in 2020, offsetting decline in other business areas, said Karen Bauer, treasurer and head of investor relations at Badger. For 2021, two acquisitions of water quality monitoring companies helped.

Utility customers accelerated the introduction of remote meter monitoring and other automation and digital services, which generate higher margins and increase the company’s overall profitability, she said.

This helped push net income margins to 11.5% for the 12 months ended mid-December 2020, from 10.9% in the same period in 2019. The same dynamics continued in 2021, increasing margins to 11.8% despite increasing difficulties in securing electronic components and other supplies such as packaging materials, the company said.

“We could have delivered more sales if not for supply chain restraint,” Bauer said.

Although smaller companies as a group followed larger ones, Bauer said that Badger’s smaller size proved to be an advantage over the past two years. After discovering problems in the resin supply chain, the company worked quickly to redesign products and increase prices, without more decision-making teams to slow it down.

“Our agility and flexibility as a smaller company helped us see these challenges faster and respond to them perhaps faster than our larger colleagues,” she said. “You are not waiting for a monthly surgery meeting.”

Debt and cash

Many companies were hit by the money crisis that followed the financial crisis in 2008 and 2009, and hurried to borrow when the pandemic hit in 2020. Large companies were able to borrow large sums, issuing a median of 123.6 million dollars in debt during the 12 months that ended in late 2020. The year before, they issued only $ 6.4 million. In 2021, they began paying it down, cutting debt by an average of $ 24 million, according to data from FactSet.

Midcap companies also borrowed in 2020, but to a much lesser extent, and they also spent the last 12 months reducing debt overall. Midcaps increased its borrowing by a median of $ 1.4 million in 2020, according to debt issuance data from FactSet, but their median debt burden decreased by a median of $ 6.2 million last year.

Small-caps have not increased debt issuance in the last three years, according to FactSet. These companies reduced their debt slightly in 2019 and 2020, but cut it by a median of 4 million dollars in 2021.

Companies “issued debt to ensure they had enough liquidity to survive the next three, four, five years without hitting the debt markets if it was not available,” said Mr. Kloss, Brandywine’s portfolio manager.

Companies have begun repaying their debt and spending their money – a sign that they believe the worst pandemic is behind them, analysts said. Where cash and short-term investments in the company’s balance sheets increased during the pandemic, it has begun to decline for large and medium-sized companies.

Hertz was among the companies that filed for bankruptcy in 2020. It has since come from legal protection.


Constanza Hevia H. for The Wall Street Journal

“What has been encouraging is that we are seeing an increase in the corporate market [capital expenditures]”Not only do companies buy back shares or return money to shareholders, but they use it to reinvest in their business, perhaps through mergers and acquisitions,” said Christopher Smart, Global Chief Strategy for Investment Manager Barings.

Surviving bias

Deficiencies in the journal’s analysis: Companies that did not survive the pandemic intact were acquired or struggled and dropped out of the indices.

Bankruptcy filings – a measure of the most extreme corporate failure – among small and medium-sized public companies increased in 2020, according to data from BankruptcyData, a division of New Generation Research Inc., which tracks bankruptcies from companies with public equity or debt.

There were far fewer such restructurings in 2021, with public companies on their way to ending the year with about two-thirds as many bankruptcy applications as they had in 2019.

Among public companies with $ 100 million to $ 1 billion in revenue – like many companies in the S&P 600 index – there were 38 bankruptcies in 2020, more than double the two previous years.

Bankruptcies among companies with $ 1 billion to $ 10 billion in turnover – like many companies in the S&P 400 index – increased to 29 in 2020 from just four in 2019.

They included the car rental company Hertz Corp.

, fracking pioneer Chesapeake Energy Corp.

and luxury retailer Neiman Marcus, who had publicly traded debt. All three companies have since come out of legal protection.

The largest companies, those with at least $ 10 billion in annual sales, have largely avoided bankruptcy during the pandemic. There were three who applied for Chapter 11 in 2020: dealer JC Penney Co. – which has since left Chapter 11 with new owners – and two airlines, Chile’s Latam Airlines Group SA and Grupo Aeromexico SAB.

There was only one in 2021, a Chilean car importer.

Write to Theo Francis at, Thomas Gryta at and Nina Trentmann at

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