From Urban Outfitters to Chewy, CEOs can’t stop talking about the labor shortages they’re seeing both in the US and globally.
The number of corporate calls with at least one mention of “labor shortage” is surging, according to transcripts collected by Sentieo, a financial research company. Up until 2021, there had been fewer than 60 mentions per quarter of the phrase “labor shortage.” In the second quarter of 2021, “labor shortage” was referenced 136 times.
“You certainly can’t have a conversation with any business person across America, certainly, [and] I think fast coming across the globe, without labor shortages and tightness in markets coming up,” said Marie Robinson, executive vice president and chief supply chain officer of food-distributing giant Sysco, on a May 20 analyst call.
A Morgan Stanley research note on June 28 mentioned the trend and suggested that labor market tightness in an increasing number of industries was raising the prospect of further wage increases.
CEOs and other executives on corporate calls described how labor shortages have impacted their operations: delays in construction and approvals for building residential homes, which part of the meat is being sold (deboning dark meat requires more labor), simplified menus to ease the pressures on overloaded restaurant kitchens.
On a June 8 conference call, Patrick Pacious, the CEO of Choice Hotels Internationals, which owns hotel chains like Comfort and Quality Inn, said staffing shortages meant that “many of the owners are actually folding their sheets and towels and making the beds in our hotels.”
Several CEOs reminded investors that the pandemic’s impact is ongoing. Mark R. Belton, CEO of Trifast, a manufacturing company, said on a June 24 conference call that with extended lockdowns in Malaysia, its factory there is currently allowing just 30% of its workforce in.
The pandemic also has slowed the return of migrant workers. About 40% of laborers in Maharashtra, India, had gone back to their hometowns when Covid-19 hit, said Tikkavarapu Venkata Sandeep Kumar Reddy, an executive director of Gayatri Projects Limited, a construction company.
Labor shortages are pushing companies from FedEx to Chewy to raise wages. “We invested in higher wages and short-term incentives, which to some degree helped overcome [fulfillment center] staffing constraints,” said Sumit Singh, CEO of Chewy, a pet supplies retailer, on the company’s quarterly earnings call on June 10.
Several CEOs said their companies were using more automation and robotics to help offset the labor challenges. “[W]e are doing everything we can possibly do, whether it is from wages, from technology, from routing and all things associated with it to make sure that we can get our services improved,” FedEx president Raj Subramaniam, said on the company’s fiscal fourth-quarter earnings call on June 21.
But in some cases even higher pay is not enough. “We’ve raised wages in some places, and in some places, even after raising wages, there’s still a labor shortage,” said Mark Schiller, the CEO of Hain Celestial Group, a food and personal care company, on a June 16 conference call. “And so we’re doing the best we can with the cards that we’ve been dealt. And so far, we’re faring pretty well, but it is definitely putting pressure on the P&L.”
Anthony Capuano, CEO of Marriott International, suggested on a June 21 conference call that the competition for hourly labor is wider than it has traditionally been. “[N]ot only are we competing for labor with other hospitality companies. Maybe more so than in any other recovery, we’re competing for labor outside our sector—with retail, for instance.”
Unemployment benefits also continue to be a topic of discussion in the US, where 26 states will have wound down extended unemployment benefits by the end of July.
On a June 9 earnings call, Steven Spinner, the CEO of United Natural Foods, a large distributor of natural foods and health products, said he doesn’t think much of the trucking industry’s driver shortage is related to unemployment benefits. “Our drivers are sophisticated. They’re knowledgeable, and they’re working,” said Spinner. He expects the mismatch between pent-up demand and the shortage of workers to be temporary.
But business leaders from Capuano at Marriott to the CEO of arcade chain Dave & Buster’s said that the extended unemployment benefits have been a factor. Capuano noted that the winding down of emergency unemployment benefits, along with the return of in-person schooling to make it easier on parents who otherwise would be working, will “free up some availability of labor.”