Companies making rapid changes amid the health crisis.
A global pandemic has brought about unforeseen consequences at every level of business, and even some of the biggest publicly traded companies in the world haven't been immune to its effects. In fact, many of these companies are pivoting in ways that only a year ago would've been unthinkable. Yet there might be some method to the madness, as changing strategies to adapt could offer key advantages in these unprecedented times. Some of the changes the following companies have made are natural progressions of their business models; some seem to come out of left field. But all of them have the potential to revolutionize each of these businesses, and smart investors will keep a close eye on how successful these new strategies are in the months to come. Here are eight companies pivoting strategies amid the pandemic.
Amazon.com (ticker: AMZN)
The reigning king of online retail has only solidified its position at the top during the pandemic. Last quarter, Amazon reported that net sales increased 40% to $88.9 billion, a new company record, and sales in North America rose 43%. So why, then, would the company want to acquire some Sears and J.C. Penney locations of all things? Don't worry, there's not an Amazon anchor store coming to your local mall just yet. Instead, Amazon plans to use the spaces as distribution hubs to help further cut down delivery times -- something the company is sure to prioritize after delivery delays in the early days of the pandemic. These abandoned, 100,000-square-foot department stores are often located on prime real estate, so it's no wonder Amazon wants to turn them into Prime real estate.
If Amazon is going to step onto retail's turf, you'd best believe retail is going to step back. The largest brick-and-mortar retailer in the world has beefed up its online presence over the years, allowing Walmart to strike while the iron was hot during the pandemic. As online grocery purchases skyrocketed this year, Walmart has reaped the rewards, enjoying an incredible 97% increase in e-commerce sales during the second quarter as pickup and delivery services "continued to experience all-time high sales volume," according to its most recent earnings report. Walmart has plans to take this success a step further with its new Walmart+ service, an Amazon Prime competitor that will provide members with same-day grocery delivery and fuel discounts for $98 a year. Given the company's recent success with e-commerce, a membership plan makes perfect sense -- and will be a nice addition to Walmart's online blitz.
You're probably used to finding your favorite PepsiCo products at grocery stores, restaurants and movie theaters. But months of lockdown have taken their toll on PepsiCo sales, which declined 3.1% in the second quarter. So PepsiCo has decided to reach consumers directly through two new initiatives: Snacks.com and PantryShop.com. At Snacks.com, PepsiCo gives the people what they want with two-day shipping of their favorite Cheetos, Doritos and Tostitos chips; meanwhile, PantryShop.com combines PepsiCo products into meal kits. Selling directly to consumers is a new gambit from a company that you're used to seeing on grocery store shelves, but with so many people grocery shopping online, PepsiCo would be foolish to ignore this opportunity.
AMC Entertainment (AMC)
With all of its U.S. theaters closed throughout the entirety of the second quarter, it's no surprise that AMC's revenue plunged 98.7% year over year. But as AMC now reopens its theaters in phases across the country, the company has come up with some novel methods for getting customers back into theaters. First, for one day only, AMC began selling tickets for 15 cents, or roughly what they cost when the chain first opened its doors in 1920. And there won't be new films on screen -- instead, AMC will try to capitalize on nostalgia with showings of "Ghostbusters," "Grease" and other classics. For a company that thrives on hot new blockbuster films, taking a page out of yesteryear's playbook is certainly a pivot -- but desperate times call for desperate measures.
Walgreens Boots Alliance (WBA)
Fewer consumers are heading to Walgreens locations for groceries these days -- but even worse, fewer patients have been going to their doctors, getting prescriptions and filling them at Walgreens. This is a key source of revenue, so the company has decided to revamp its business and make itself a one-stop shop for all of a customer's medical needs. To that end, in July, Walgreens paid $1 billion in equity and debt for a 30% stake in primary care provider VillageMD. The money will fund the construction of between 500 and 700 VillageMD clinics at Walgreens locations across the country over the next five years, in the hopes that Walgreens will stand out in the competitive drugstore industry.
New York Times Co. (NYT)
Print media has had a tough go of it ever since the internet came along, and this year has only made things more difficult. Fears of a recession have spurred advertisers to pull back on spending, leading to a 43.9% decline in advertising revenue at the New York Times in the second quarter. But the company did report one bit of good news: For the first time in its 170-year history, digital revenue surpassed print revenue. This is less of a pivot and more of a natural evolution of the New York Times' business, as the company has focused on improving digital subscriptions for years now -- but this year may be the turning point. Last quarter, digital subscriptions grew 29.6%, while print subscription revenue dropped 6.7%, illustrating just how dramatically digital beat print, a trend that is likely to continue in the coming years.
Eastman Kodak (KODK)
The company that brought its first camera to market back in the 1880s has fallen on hard times in recent years, ceding ground in the camera industry to competitors (and smartphones). But in July, Kodak stormed into an entirely new industry thanks to a $765 million loan from the U.S. government to produce generic pharmaceutical ingredients. Kodak has had a specialty chemicals segment for years, but those chemicals were mainly for developing photographs -- this loan would help Kodak build out a novel arm for the company to help the U.S. in its battle against the virus, as well as secure the country's future pipeline of pharmaceutical chemicals. News of the loan and subsequent stock market frenzy basically tripled Kodak's value overnight, but a pullback and oncoming investigation from the Securities and Exchange Commission means the renaissance may end up short-lived.
Chipotle Mexican Grill (CMG)
The company that made fast-casual dining famous is pivoting away from "casual" and focusing more on "fast." Chipotle was already planning to add more drive-thru locations with so-called "Chipotlanes" throughout 2020, but a global pandemic has accelerated those plans; while 40% of the company's new locations included drive-thrus in 2019, Chipotle wants that number to grow to 60% of new Chipotle locations as soon as possible. Keep in mind that you can't order from Chipotlanes; instead, you need to order ahead online and pick your food up at the drive-thru window. This keeps service quick -- and it contributed to the impressive 80.8% increase in digital sales Chipotle enjoyed in the second quarter, when digital sales accounted for more than 26% of total sales. Drive-thru locations will require at least 50% more staff, but if the company can nail this new business segment, it'll be well worth the price.
Eight companies making big moves in the pandemic:
-- Amazon.com (AMZN)
-- Walmart (WMT)
-- PepsiCo (PEP)
-- AMC Entertainment (AMC)
-- Walgreens Boots Alliance (WBA)
-- New York Times Co. (NYT)
-- Eastman Kodak (KODK)
-- Chipotle Mexican Grill (CMG)
Mark Reeth is a contributing writer for U.S. News & World Report, where he writes about anything and everything to do with investing. Prior to U.S. News, Mark covered consumer goods, technology, and telecom stocks for The Motley Fool. When he's not writing about investment strategies Mark is busy running his own small business, which has given him a better appreciation of the personal finance trials and tribulations of entrepreneurs everywhere.
Mark is a graduate of the College of the Holy Cross, where he studied History and Education. You can connect with Mark via LinkedIn, or follow him on Twitter.