By Paul Vigna 

Another bruising week for the market. The Dow Jones Industrial Average lost nearly 3,000 points in one day -- and is trading just over 20000. Circuit breakers were tripped twice, briefly halting all stock trading. Crude oil futures hit an 18-year low. In a particularly distressing sign, investors were even selling long-term government bonds. It was a week where nothing felt safe to hold.

The Dow and S&P 500 are both on course for double-digit percentage declines for the week, extending the losses from their mid-February peaks to about 30%.

That said, there are some things that stood out. Let's look at this week's winners and losers.

Winner: Blue Apron and the Meal-Kit Industry

Habit is a powerful thing, and sometimes crises force new habits on people.

Standing to benefit are meal-kit and food-delivery companies like Blue Apron Holdings Inc. and Grubhub Inc., which should see a spike in demand while more people are stuck at home.

Shares of Blue Apron, currently at $14.34, started the week at $2.25 and are trading at their highest level since early 2019. Berlin-based HelloFresh SE, the largest meal-kit provider in the U.S., is up 25% this week.

Analysts at Canaccord Genuity said Blue Apron could benefit from an increase in orders, along with larger individual order sizes, given there are more people at home who are eating every meal there.

Making it work long term, though, is a different story. Blue Apron has cash -- it raised $199 million privately and $300 million in its IPO -- and generates revenue but hasn't had a profitable quarter since going public in 2017.

The Canaccord analysts warned Monday that Blue Apron could "face some liquidity constraints if top lines trends do not improve."

Meanwhile, Grubhub, which focuses on food delivery, hasn't seen the same bump, at least not initially. Shares are down about 3% this week and 33% over the past month, more in line with the broader market.

Loser: Hospitality Industry

It is almost unfair to single out one loser this week. But the hospitality industry is a major employer in the U.S., and its dynamics are representative of American corporations. Let's focus there.

The novel coronavirus pandemic has already exacted a greater toll on the hotel industry than "Sept. 11 and the 2008 recession combined," a trade group executive said this week after meeting with President Trump.

The stocks reflect that. MGM Resorts International is down 69% over this month. Marriott International Inc. is down 46%. Hilton Worldwide Holdings Inc. is down 40%.

The damage isn't just to stock prices. Most of these companies have debt that needs to be serviced.

MGM has $11.3 billion in total debt; Marriott has $10.9 billion; Hilton has about $8 billion. They aren't alone. Insatiable demand for yield along with rock-bottom borrowing costs in the years after the financial crisis produced a perfect world for issuing debt. Total nonfinancial U.S. corporate debt topped $10 trillion in 2019.

That wasn't much of a concern when the economy was growing. It should be now.

If the coming downturn rips their bottom lines -- and in the short-term at least it will -- these companies are likely going to be forced to choose between debt payments and operations. That, of course, likely means layoffs.

The hospitality industry employs millions of workers, with relatively low wages. It is going to be a major flashpoint in containing the economic damage. You can understand why the federal government is already talking about bailouts.

The leisure and hospitality industry in the U.S. employs about 15.8 million people, according to the latest data from the Bureau of Labor Statistics; that is more than construction, manufacturing, retail, energy, tech, and financial services.

The sector is also one of the lowest-paying sectors in the country. Average hourly wages for nonsupervisory workers were $14.93 in February. That translates to a lot of vulnerable workers.

Marriott on Thursday showed how deep the cuts will need to be to survive the crisis. The company is cutting staff, closing hotels and slashing salaries for its executives -- and drew down on its lines of credit and suspended its dividend.

That is just for now. Not until after the crisis passes will investors, debtors and the companies themselves discover how bad and permanent the damage is.

Next Week: Watch Uncle Sam

Yes, there are economic reports next week. Keep an eye out for a spike in weekly jobless claims. But by far the biggest thing to watch is Washington. The only entity large enough to provide shock absorbers for the economy is the federal government.

The Trump administration has proposed sending checks directly to citizens and setting up credit facilities for industries. The total price tag is north of $1 trillion. Senate Republicans expressed support for some parts of the plan.

The goal is to pass a bill by the beginning of next week. Even if a bitterly divided Washington can come up with an aid package, Senate Majority Leader Mitch McConnell suggested another may be needed eventually.

Write to Paul Vigna at paul.vigna@wsj.com

 

(END) Dow Jones Newswires

March 20, 2020 07:14 ET (11:14 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
HelloFresh (TG:HFG)
Historical Stock Chart
Von Feb 2024 bis Mär 2024 Click Here for more HelloFresh Charts.
HelloFresh (TG:HFG)
Historical Stock Chart
Von Mär 2023 bis Mär 2024 Click Here for more HelloFresh Charts.