The Recovery

Video Index (with direct links)
0:00 I visit a Burger King Drive-Thru
0:23 My family’s glamping trip in Santa Barbara
0:42 Burger King’s drive-thru of the future
1:30 California coronavirus update
2:05 Will Disneyland be opening soon? Evidence suggests that it should
2:45 249,000 jobs were added in August, many of them in the retail sector
3:31 NFL’s Los Angeles Rams debut in the new Sofi stadium in Inglewood
4:03 Many retailers report record earnings in Q2
5:09 Walmart’s drones will compete with Amazon’s drones for delivery

Hello Investors!

I hope you had a nice Labor Day weekend!

My family and I spent last week camping, well at least glamping in a cabin at El Capitan Canyon in Santa Barbara.  We did get to see some cool wildlife like raccoons, woodpeckers, and sheep!

Drive-Thru Restaurants of the Future

Burger King recently announced that it will be planning new restaurant designs that will feature a totally touchless customer experience.  These new restaurants have been inspired by the pandemic and will be 60% smaller than a standard Burger King.  They’ll have conveyor belts that deliver orders to customers, outdoor seating, a walk-up ordering window, and three drive-thru lanes.  Wow, three drive thru lanes!  This will help ease congestion, as the research group NPD reported that drive-thru visits increased by 26% in the months of April, May and June of this year.  These first Burger King restaurants will debut next year in Florida and in the Caribbean and will perhaps make their way out to California soon.

Taco Bell also announced changes for its future restaurants, with new stores having a smaller footprint, and an additional drive thru lane only for pickup, for customers who order ahead on the mobile app.

Some California Counties are Downgraded from Purple to Red

Last week, several counties, including Orange County, were downgraded from the purple color to the red color on California’s color coded coronavirus classification system.  Wow, that’s a mouthful.  That’s great news as the state continues to make progress against the virus.  Some of the businesses allowed to open for indoor service in the red zone are hair salons, retail shops and malls at 50% capacity, and churches and movie theaters at 25% capacity, or 100 people, which ever is fewer.

Check out this site for an updated list of what businesses are or are not allowed to open based on the counties’ classification colo

When Will Theme Parks Reopen?

Disney and Universal are urging Governor Newsom to reopen Disneyland and Universal Studios after 6 months of being closed.  The governor could only say that state officials are “making progress toward opening the theme parks soon” but not much more than that.

The good news is that no outbreaks have been reported at Disney World and Universal Studios in Florida, Sea World, Busch Gardens or the Six flags theme parks that have opened, and there haven’t been any reported outbreaks in any of the major theme parks around the world that have opened.  I don’t know about you, but I’m getting stir crazy at home and am looking forward to going back to Disneyland soon (and my 4-year old son is, too).

Positive Hiring News in the Retail Sector

Data from the Bureau of Labor Statistics show that 249,000 net new jobs were added to the economy in August, up from 236,000 in July, with the retail sector adding more jobs than any other sector in August.
A lot of that retail job growth was in large merchandise stores like Costco and Walmart, but almost all other segments in retail added jobs.  Surprisingly, there are now more people employed in the food and beverage sector now than there were in August of 2019, 3.12 million people versus 3.08 million.  We are certainly not out of the woods, with the national unemployment rate still at 8.3% versus 4.1% last year.  But it has come down a lot since April when it was at 14.7%.

Football is back!

Football season is underway, and the LA Rams debuted in the new Sofi stadium, which is the most expensive stadium ever built, reportedly costing $5 billion.  The Rams defeated the Dallas Cowboys 20-17 in front of a crowd of, well, 0 people.  There’s been a tremendous amount of real estate development around the stadium in Inglewood which will be great for the local area once everything is fully open.  It’s good to see football back, along with baseball and basketball, to return to some degree of normalcy.

Some Retailers Ring Up Record Profits in the Second Quarter

Many large retailers are have reported record breaking sales numbers for the second quarter of this year.  How is this possible?  Well, many of them have a strong online presence, and Internet purchases make up a lot of their sales, whether customers are getting the products shipped to their homes or buying online and picking up in the store.  Let’s go over some of the retailers who are doing extremely well during the pandemic.
  • BigLots sales for the quarter ending August 31 were up 31.5% versus last year, for record breaking second quarter.
  • Dicks Sporting Goods reported 194% increase in e-commerce sales for record earnings in the second quarter and their stock is up 50% over last year.
  • Target’s profits were up 80% versus last year.  The CEO attributes this to a combination of online and in-store sales.  Their typical same-store sales growth is usually around 8%, and this quarter it was 24%.
  • Home Depot and Walmart’s sales and profits also surged during this time.
While it’s nice to see that some retailers are doing well at this time, it’s sad to see that these results are often at the expense of the mom and pop stores, who I’d love to see get back on their feet when this is all over.

Walmart’s Drone Fight vs. Amazon

In my last email, I reported that Amazon’s drone delivery service has received FAA approval to start delivering packages by drone.  Walmart doesn’t want to be left behind, and recently partnered with a drone company called Flytrex to test delivery in Fayetteville, North Carolina.  The company states that not only does it help reduce labor, but many customers are looking for contactless delivery.  So the list of companies experimenting with drones for delivery is now growing.  CVS, Walgreens, Amazon, and Walmart.  When I first heard about drone deliveries a few years ago, I thought it was a joke.  I still have one lingering question which is whether drone delivery will be profitable if some people decide that the drone would be a cool souvenir, or if the drones get damaged by the weather or by vandalism.

That’s all I’ve got for this week.  Thanks for reading. See you next time!

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Mike Lin, CRE