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Omicron surge puts the brakes on recovery of U.S. companies

Stock Markets Jan 11, 2022 02:30PM ET
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© Reuters. FILE PHOTO: A view of an American Eagle Outfitters store in Arlington, Virginia, U.S., June 1, 2021. REUTERS/Erin Scott
 
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By Uday Sampath Kumar and Praveen Paramasivam

(Reuters) - U.S. companies ranging from American Eagle to United Airlines are set for a tepid start to the year as the fast-spreading Omicron variant threatens to slow the fragile rebound in growth by exacerbating supply chain problems and labor shortages.

The roll-out of COVID-19 vaccines and easing of restrictions last year had promised to be a boon for companies looking to recover from the heavy toll that the pandemic had taken on them.

But the fast and relentless surge of Omicron-related infections has once again put sales and profits of companies under pressure.

Staffing, customer traffic and store operating hours have been hampered as the daily infections in the United States touched 1.35 million, the highest in the world.

The first signs of its impact on Corporate America is the hit to sales over the recent weeks seen by companies such as American Eagle Outfitters (NYSE:AEO), Abercrombie & Fitch and Lululemon Athletica (NASDAQ:LULU).

"Time to perhaps buckle your seat-belts as a bumpy end to the fourth quarter and uncertainty surrounding supply chain and anniversarying stimulus impacts in the first quarter are likely to make the next few months volatile," MKM Partners analyst Roxanne Meyer said.

The U.S. travel industry, a sector that has barely been able to get back on its feet, too has been jolted by staff shortages forcing cancellations of flights and cruises during the crucial holiday.

American Airlines (NASDAQ:AAL) Group Inc expects cost per available seat mile to be up 13% to 14% compared to pre-pandemic levels, while United Airlines said it was reducing near-term flight schedules as about 3,000 employees have tested positive for COVID-19.

However, some companies have stood to benefit. Pharmacy chain CVS Health Corp (NYSE:CVS) raised its 2021 profit view on expectations of higher demand for COVID-19 vaccines and over-the-counter testing, while Abbott Laboratories (NYSE:ABT) expects sales of its COVID-19 tests to stay strong in the near term.

Omicron surge puts the brakes on recovery of U.S. companies
 

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