If there’s another COVID-19 lockdown, here’s what you need to know

British Prime Minister Boris Johnson kicked off 2021 by re-locking his country as new mutations in the COVID-19 virus, potentially more deadly than the previous one, spread across the country.

Now that these mutations have been discovered in the United States, and because President Biden’s advisers previously said new four- to six-week lockdowns could help defeat the old coronavirus outbreak, investors should consider the implications for companies if he “follows the science” and opts for yet another lockdown.

Last time it was only going to take two weeks to bend the curve, and it went on for months. There are plenty of businesses that still haven’t fully reopened almost a year later, so further closings could be devastating. Here are some of the industries most at risk.

Entertainment

The film industry is already on the verge of ruin as it runs at minimum capacity and there are few movies in theaters to see.

AMC Entertainment Holdings (NYSE: AMC) barely avoided bankruptcy by raising nearly a billion dollars of its lenders to survive until 2021, but only if the economy reopens, movie studios are releasing movies in theaters again, and Hollywood is starting to make new movies. If the faucet is turned off any further, it and other theater operators could collapse.

Studios use their streaming services to get movies to consumers, sometimes undermine the cinema exclusivity window. AT&T‘s (NYSE: T) The Warner Bros. studio is releasing its entire 2021 movie list to HBO Max the same day they hit theaters, while Disney (NYSE: DIS) says 80% of the roughly 100 movies and TV shows it has planned for the future will go to its Disney + service or other direct-to-consumer services.

Disney needs to beef up its streaming service as its theme parks are operating at less than optimal capacity, and Disneyland in California remains closed, even though the state governor has declared Hollywood studios as essential businesses in his new orders. lock.

In the same way, Comcast‘s (NASDAQ: CMCSA) The Universal Studios theme park in California is closed, although its parks have reopened elsewhere, but further closures would further increase the losses this segment causes on their financial statements.

Restaurants

The restaurant industry barely survived the pandemic, subsisting on take out and delivery until seats inside are authorized again. Yet with severely reduced seating capacity, chains have resorted to outdoor seating in their parking lots to help make up the difference.

Some casual restaurant operators like Darden Restaurants (NYSE: DRI) did better than most because they had already established a strong offsite business before the pandemic hit, while fast food chains like Mcdonalds (NYSE: MCD) with their steering wheel windows and third-party delivery services, have come out as well – if not unscathed, certainly in a better position than family and food chains.

Drive-thru service has also become crucial for the fast-casual leader Mexican Grill Chipotle (NYSE: CMG) and even Shake Shack (NYSE: SHAK), who is committed to drill holes in walls from its restaurants wherever it can to install windows at the wheel and in the Italian style.

Catering giant Dave & Buster‘s (NASDAQ: PLAY), however, did not fare well as he had no takeaway business to fall back on. Its entertainment-oriented arcade and game atmosphere is only suitable for a restaurant experience.

While the industry has learned valuable lessons on how to operate in the future, further closures could further devastate restaurants as reduced volumes will eventually gut their financials.

Travel and tourism

As noted above, theme parks would undoubtedly feel the quick impact of a shutdown, but industries that even tangentially support the parks would be in danger of collapsing.

Airlines, for example, are transporting families to these vacation destinations and are at risk of going bankrupt, although falling demand for business travel is likely to seal their fate. Carrying out heavy debts and battling an extended period of reduced demand, without even converting their passenger planes to cargo as some do, would compensate for the loss of business.

American Airlines Group (NASDAQ: AAL), which started transporting goods for the first time in 36 years last year, is burn money at the rate of $ 30 million per day, or some $ 11 billion per year. Delta Airlines (NYSE: DAL) burns “only” 12 million dollars a day.

Cruise ship operators barely walk on water to stay afloat, with Carnival (NYSE: CCL) (NYSE: CUK), Norwegian Cruise Line Holdings (NYSE: NCLH), and Royal Caribbean (NYSE: RCL) all of them are pushing their current relaunch dates back to 2021. Disney too, recently canceled all spring cruises.

Even then, when they return to the high seas, it will only be with a few vessels of much reduced capacity, barely enough to sustain them for very long. Their fleets are not expected to resume a full program until 2022 at the earliest, so new foreclosure orders would push their launch dates even longer, further compromising their ability to survive.

A glimmer of hope ?

The economy could escape the devastation of the new lockdowns if the vaccines distributed prove to be effective enough against the new strains of COVID-19, as some of the pharmaceutical and biotech companies indicate.

Yet the threat of lingering lockdowns to businesses is a danger that investors should remain aware of. Shutting down large swathes of industry again will ruin the economy, no matter what loans and aid the government pledges, sending the country into a state of disaster. new recession, otherwise depression.

With this possibility in mind, investors should take a defensive posture and protect their portfolios from bottlenecks congestion.