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Monday, November 1, 2021
It was a brutal weekend for one airline and a telling weekend on the state of America’s labor shortage.
American Airlines canceled about 14.3% of its flights on Sunday, according to data shared by the company to Yahoo Finance, in large part because it was unable to find staff to carry out operations. Staffing problems were most acute in the flight attendant category. The airline has canceled an astounding 1,623 flights since Friday, the data indicates.
“We expect considerable improvement beginning tomorrow with some residual impact from the weekend,” an American Airlines spokesperson told Yahoo Finance via email.
Bottom line here is twofold.
First, if you are traveling this holiday season expect even more of a terrible experience than the one you remember from the trip to Oregon in 2019. Pick up a package of beef jerky and a protein bar once you make it beyond a checkpoint because you could easily be stranded at the airport at moment’s notice. Airlines are going to have severe challenges in trying to flex up their workforces to meet the inevitable resurgence in travel after most of us didn’t have a holiday season in 2020.
Secondarily, to those on the Street saying companies are dealing with labor challenges just fine (those challenges include paying materially higher wages and finding the bodies to pay those materially higher wages) I say … catch a clue.
America’s labor shortage — and all the ugly aftershocks associated with it — is getting worse and is an underappreciated earnings risk headed into 2022. The labor shortage is hurting sales at companies (restaurants can’t stay open if there isn’t someone to make the food) and profit margins.
I mean look at this commentary:
“Certainly, it’s a very challenging staffing environment in the U.S., a little bit less so in Europe, but still challenging in Europe. In the U.S. for us, we are seeing, as I’ve mentioned a few calls ago that there is wage inflation. Our franchisees are increasing wages there over 10% wage inflation year-to-date that we’re seeing in our McOpCo restaurants were up over 15% on wages, and that is having some helpful benefits, certainly, the higher wages that you pay allows you to stay competitive. But we’re also seeing that is just, it’s very challenging right now in the market to find the level of talent that you need. And so for us, it is putting some pressure on things like operating hours, where we might be dialing back late night for example from what we would ordinarily be doing. It’s also putting some pressure around speed of service, where we are down a little bit on speed of service over the last, kind of, year-to-date and we did in the last quarter. That’s also a function of not being able to have the restaurants fully staffed.” — McDonald’s CEO Chris Kempczinski on the company’s earnings call
“We have seen some staffing challenges in certain parts of the country, but I think from the results we’ve been able to deliver, it demonstrates our ability to navigate through these challenges, whether it’d be staffing, whether it’d be any of the supply chain challenges or any of the inflationary pressures. When you look at it, one of the things that we’ve done during this time, as we’ve looked at adjusting the staffing levels and how do we manage through this, is we’ve also taken action to adjust store operating hours and when I say that we’ve really looked at the evening day part and pulled that back from an hours perspective and that has enabled us to redeploy staffing into other stores where we need it.” — Starbucks CEO Kevin Johnson on the company’s earnings call (Starbucks had to jack up wages recently).
“We have seen obviously some pressures in the near-term. Popeyes was most impacted throughout the third quarter. We saw some of that in late night, which is a big part of our business for Popeyes in the U.S. We also saw some of it in our distribution business in the Northeast, which impacted our ability to get some products out on a timely basis in the Northeast which had a bit of a drag on the business. There is pressure. There continues to be near-term challenges on the labor front.” — Restaurant Brands CEO Jose Cil on Yahoo Finance Live.
And on that note, prepare your holiday travel and stock portfolio accordingly. Bring on Friday’s October jobs report release.
Odds and ends
Game over for one Amazon disciple: Some sevens months into a likely nightmarish job as COO of GameStop, Jenna Owens has departed the retailer turn self-imposed tech player. Owens — a former top exec at Amazon and Google— was one of the first splashy hires by GameStop chairman and major shareholder Ryan Cohen, of Chewy fame. The regulatory filing gave no reason for Owens exit. GameStop didn’t return a request for comment. As I have written, GameStop is a disaster with no clear path to being around in the year 2031. The company’s lack of transparency with media (analysts no longer cover GameStop) and the investors who have propped up its stock aren’t helping its turnaround. Shares have cratered 47% from their 52-week high on Jan. 27.
For traders out there: Here are a couple names with interesting action (or potential upcoming catalysts) that caught my attention this weekend. By the close of Friday’s session, eBay regained most of its earnings day plunge from earlier in the week on very solid volume. No clue who is stepping up to buy shares in this company which is seeing user declines but someone did, and it’s a name to watch this week. Keep an eye on Harley-Davidson on news this weekend of a truce in the steel tariff war between the U.S. and European Union. These tariffs have really hampered Harley-Davidson on the cost front (while it’s top line continues to be anemic because people are buying pandemic cars, not two wheelers). Cost relief, however minor, should help Harley. Hotel stocks such as Marriott, Hilton and Hyatt should be on your radar ahead of what could be more upbeat commentary from execs at a key conference in New York City early next week. I liked what Royal Caribbean had to say about booking trends on its earnings call last week, and the comments are likely to be echoed by hotel companies as we inch toward the holiday season. Airbnb’s earnings this week could also shed light on the positive demand trends beginning to take hold. (Royal Caribbean CFO Jason Liberty and Hilton CEO Christopher Nassetta will be on Yahoo Finance Live this morning.)
EV maker Polestar: I spent this weekend cruising around in an all-electric Polestar 2 in a bid to better understand the soon-to-be public company (here is my chat with SPAC sponsor Alec Gores and Polestar CEO Thomas Ingenlath). I will say this: the Polestar 2 embarrassed the GM Chevy Bolt (which I also test drove, but I consider the Polestar 2 my first real electric car experience because the Bolt’s overall experience was dreadful). Is the Polestar 2 perfect? No, I think it needs more cupholders, for example. Is driving an electric car absent headaches? No, as I learned driving around searching for charging stations and then investing two hours Sunday to go from a 66% charge to a 78% charge inside a Toyota dealership parking lot. Did I miss the engine sound? Hell yes. But all in all, it was a solid experience that reminded me of the very credible competition coming right at Tesla from Polestar, Ford, Volkswagen and yes, even GM (a Tesla owner who parked near me in a Walmart parking lot said the Polestar looked great). It also left me thinking Polestar may have success as a public company if it could meet its production and financial goals.
Yahoo Finance Highlights