Pain is Still Widespread Throughout the US Economy

Despite recent optimism across corporate America forecasting better days ahead, the pain from COVID-19 remains far from over.  More than 60% of US companies analyzed in a recent Boston Consulting Group study are under financial or operational stress as of the end of the second quarter of 2020, up nearly 50% year-over-year. 

Seven months into the pandemic, a worrisome number of companies remain at risk, underscoring the deep economic distress wrought by COVID-19 and related shutdowns. Of the 721 US companies tracked by the BCG TURN Radar Index, 14% are in distress, which the report defines as either challenged to meet their financial obligations or under operational pressure requiring significant restructuring.  This represents a 43% increase year-over-year.

The most distressed sectors in the US economy are automotive and mobility (52% stressed, 16% distressed), travel and tourism (61% stressed, 16% distressed), and retail (67% stressed, 18% distressed). More than 52% of restaurants are categorized in distress, though the industry is beginning to climb out of steep decline that began in March. A lack of additional stimulus money from the government compounds the risk for these sectors.

The report highlights large groceries as a bright spot for retail, with more than 43% indexed as “stable.”

As 2021 winds on, large gaps between winners and losers will continue to widen, with larger companies likely achieving a stronger recovery. To succeed, smaller companies will have to get creative and find unexpected advantages. And healthcare providers, biopharma, tech, and transportations and logistics have actually been boosted by demand related to the pandemic.

“BCG TURN Radar confirms the impression created by stories of business failures and layoffs—the COVID-19 pandemic is causing deep, structural changes that are likely to be long-lasting,” says Luke Pototschnik, BCG senior partner, and head of the firm’s Transformation practice and BCG TURN in North America. “The impact may be most severe on companies that were challenged to begin with. But the good news is that there are actions companies can take—such as generating short-term cash to fund long-term investment—that can mitigate the worst of the downturn and help set them on the path to recovery.”