One in five North American public companies remains in financial or operational difficulty, according to BCG Research


BOSTON, June 16, 2021 / PRNewswire / – Despite the apparent recovery from the effects of the COVID-19 pandemic, about 22% of North American state-owned enterprises were not financially or operationally stable at the end of the first quarter of 2021, according to a new study of Boston Advisory Group (BCG).

Among these companies, 20% were stressed, i.e. underperforming their peers in the sector or under pressure from internal or external sources, and 2% were in difficulty, i.e. having difficulties in meeting their financial obligations or encountering serious operational problems. The results, up to date March, 31st, are based on the BCG TURN Radar index, which tracks the financial and operational performance of public enterprises using more than 20 forward-looking and retrospective financial and market performance indicators and qualitative gauges. The index was developed by BCG TURN, BCG’s special transformation, recovery and restructuring unit.

Nevertheless, the trajectory is positive: at the end of the third quarter of 2020 – mid-pandemic – around 32% of North American public companies were not in the stable category (27% stressed, 5% in distress). In other words, there was a 10 percentage point increase in the proportion of stable firms over the six-month period ending. March 31, 2021.

“The companies of North America have become more stable since September 30, 2020. Demand is coming back because of vaccinations and other measures. Equally important, many companies have taken decisive action to consolidate their cost bases during the pandemic. And at the macro level, strong capital markets and aggressive monetary and stimulus measures have helped companies, ”said Luke Pototschnik, senior BCG partner and head of the firm’s Transformation practice and BCG TURN in North America.

Stress and distress still high in the media, fashion, retail and travel industries

“But BCG Radar data also shows that a large number of state-owned companies, concentrated in a handful of industries, remain under real stress. For many of them, the pandemic has accentuated or accelerated a point of existential inflection that was already underway, ”he added. added.

According to data, at the end of the first quarter of 2021 in North America:

  • 38% of media companies were stressed or in distress
  • 37% of fashion and luxury companies were stressed or in distress
  • 36% of oil and gas companies were stressed or in distress
  • 32% of travel and tourism businesses were stressed or in distress
  • 27% of distribution companies were stressed or in distress
  • 23% of materials and processing companies were stressed or in distress

There have been some improvements within these industries since the mid-pandemic. At the end of the third quarter of 2020, 69% of fashion and luxury companies were stressed or in distress and 53% of media companies were stressed or in distress.

However, as soon as March 31, 2021, 8% of fashion and luxury companies, 6% of media companies and 4% of retail companies were in genuine distress, according to the index.

Many businesses demand a fundamental reset and the ability to fund it

“In some industries, for example travel, the situation may be macro-dependent and demand will strengthen as the pandemic subsides. However, in other industries where there are many unstable companies, the major players will have need a fundamental reset of how they operate. in the market and how they operate. It will not be an easy solution, “said Pototschnik.

“The pandemic has dramatically exposed and accelerated the changes that were already underway in the way people use digital media, how they shop and the type of clothing and other items they shop for,” he said. added. “The catch for many companies is that they will have to do more than design a fundamental, top-line transformation. Despite their stressed financial and operational situation, they will also have to release funding to recruit the right talent and develop management systems. to really turn the business around and sequence the right, bold actions. It is a tall order. “

Media industry

Neal zuckerman, Senior Associate of BCG and Member of Strategy and Technology Practices, Media and Telecommunications, cited the example of the media industry. Viewers have increased the time they spend watching TV or streaming videos and plan to continue watching and streaming more after the pandemic. But, at the same time, the number of services to which they subscribe has not increased.

“Despite this dynamic of more viewing without more subscriptions, media companies continue to organize themselves much like 10 or 20 years ago, with each channel or streaming service constituting its own profit center. It is not uncommon for a company to maintain up to a dozen largely siled business units. Not only is this model extremely expensive, it also undermines the programming synergies that can be achieved with a collaborative, cross-channel approach. Smart media companies are starting to rethink their organizations, their budgets and their operating models, ”Zuckerman said. “This kind of fundamental change is essential for media companies to reverse the stress and distress that builds up in their industry.”

Fashion and luxury industry

The fashion and luxury industry, which remains stressed, is facing the same inflection point. “As the light begins to appear at the end of the pandemic tunnel, luxury brands need to rethink what, when, where and how they sell,” said BCG’s senior associate. Christine barton, member of the Transformation, Marketing, Sales & Pricing and Consumer practices.

“Many need a business model transformation that properly scales multiple traditional investment areas and reinvest the savings in digital, marketing and data analytics capabilities. It can help speed up and focus business decision making, achieve 10% to 30% reduction or reallocation. % of costs, and provide visibility and control for capital management. Additionally, tools and analytics can help fashion and luxury companies engage customers more meaningfully and enable them to deliver digital styling, seamless shopping, and post-purchase relationship management. increase net sales by 10-15%. In most cases in this industry investing in these areas is essential, ”Barton said. “It also frees up time and expense for reinvestment in creativity, innovation and product.”

Stability and size of the company

The BCG TURN Radar index shows that large public companies in the North America were overall a little more stable during the pandemic than the smaller ones. Pototschnik suggests that this situation may lead small businesses to diversify geographic risk, even within countries.

Large businesses have the ability to be more diverse. And one issue that came into play during the pandemic was geographic risk – not just country risk, but risk within regions or even states. “Supply and demand were variable within regions, which companies probably never expected. Now companies of all sizes will likely incorporate this type of geographic risk into their planning,” said Pototschnik.

For media inquiries, please contact Michael-Jon Romano at [email protected].

BCG TURN is a special unit of BCG that helps CEOs and business leaders quickly, visibly and sustainably improve their business performance while strengthening their organizations and positioning them to win in the years to come. BCG TURN helps organizations change course by turning their upside potential into dramatic performance gains. The BCG TURN team consists of transformation practitioners and combat experienced experts with a proven track record in large-scale transformation. BCG TURN is invested in lasting customer success, with a focus on accelerating performance and a commitment to delivered value.

About Boston Consulting Group
The Boston Consulting Group partners with leaders in business and society to tackle their greatest challenges and seize their greatest opportunities. BCG pioneered business strategy when it was founded in 1963. Today, we work closely with our clients to take a transformational approach to benefit all stakeholders, enabling organizations to grow. , create a sustainable competitive advantage and have a positive societal impact.

Our diverse global teams bring deep industrial and functional expertise and a range of perspectives that challenge the status quo and drive change. BCG provides solutions through advanced management, technology and design consulting, as well as corporate and digital businesses. We work under a unique collaborative model within the firm and across all levels of the client organization, fueled by the goal of helping our clients thrive and empowering them to make the world a better place.

SOURCE Boston Consulting Group (BCG)

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