Memphis firms learn adapt to summer of the coronavirus |Evanoff
Memphis firms

Ted Evanoff, Memphis Commercial Appeal, August 20, 2020

SouthernSun Asset Management’s employees flew well over 200,000 airline miles last year checking on investments as far-flung as Asia and Africa.

And travel this summer? Zero air miles. Zoom video chats occupy analysts.

Deep into August, the odd summer of the coronavirus has grated on the 26,000 enterprises in metropolitan Memphis, forcing many to figure out new ways to do old chores.

Davene Inc. relies on relentless phone sales instead of driving to face-to-face meetings. National Filter Supply assures clients its clean plant keeps the virus in check. Happi-Stores, long a testament to a Memphis family of retail entrepreneurs, opted to permanently close

What’s going on in Memphis and America reflects the change in consumer habits, the decline of regular travel and extraordinary unemployment levels. Layoffs mounted after the April shelter-in-place orders were given by mayors and governors intent on shutting businesses considered nonessential. The effort aimed to stop the virus from infecting people in close quarters.

 By June, Memphis’ retail sector, along with the hefty tourism, hotel, restaurant and entertainment economy, were shaken to their cores. Only 547,000 metro Memphis residents were employed, marking the lowest employment level here in any June since 1995, while 73,800 people were unemployed.

No one calls what the nation is enduring a depression, though the 11.9% June jobless rate in the nine-county metro area signals a slow snap back to normal. Slow or not, might a recovery have begun?

Last month, sales volumes climbed after the shelter-in-place mandates lifted and more people ventured into shops, stores and restaurants. Local sales taxes collected in Memphis and Shelby County totaled $36.8 million in July, about 31% more than a year earlier, state tax reports show.

Whether the surge shows a recovery on the way or a mere catch-up from the spring coronavirus lull isn’t clear. Sycamore Institute, a public policy analyst based in Nashville, figures catch-up. Sycamore experts say local tax rates rose in January, distorting comparisons to the year before. More on point: State taxes.Your stories live here.Fuel your hometown passion and plug into the stories that define it.Create Account

Tennessee sales taxes collected in Memphis and Shelby County dropped 21.6% in May and dropped 9.3% in June compared to the year before and finally kicked up to $87.9 million collected in July, down only 0.2% from the prior July. Whether Memphis can sustain the rebound into the autumn is an open question, Sycamore reported. 

Both the city and state face similar economic winds. Overall, state taxes collected across Tennessee during budget-year 2020 totaled 2% over the amount state officials had budgeted for, which sounds good, but might not be a bright omen.

Looking out over the next dozen months, Sycamore analyst Mandy Pellegrin calls Tennessee’s economic outlook “uncertain.” In a report a week ago, Pellegrin says: “Several federal programs helped boost consumer spending and state revenue collections, but some of those programs have expired or their effects have dissipated. At the same time, temporary job losses may become increasingly permanent the longer the pandemic goes on – which would have a negative effect on state revenues.”

Facing the fuzzy outlook, Memphis firms have adapted. Hundreds of companies kept work-from-home rules intact and cut spending after the virus infection rate stayed high. Not all sectors were hit in in the same way. Here’s a look at how five small firms have handled Memphis’ coronavirus summer.

Expansion minded

The Hickman Building, vacant since 1971, will house 5,000 square feet of retail on the ground floor, 40 apartments on the middle floors and the offices of investment management firm SouthernSun Asset Management on the top two floors. Connected parking also will be built.

Sure, fewer commuters are inbound these days.

Vacant parking stalls abound in Memphis’ center city. For instance, only about 250 employees arrive daily in First Horizon National Corp.’s 23-story skyscraper, instead of the customary 1,000 bank employees. Office staff are working from home primarily until the virus crests, a bank official said.

Less road traffic hasn’t slowed real estate investor Rooziman Shah. He just bought six Flash Markets to add to his East Memphis firm’s 100 or so Mid-South convenience stores.

“We don’t know what’s going to happen with this economy,” Shah said. “Everybody’s struggling, but convenience stores, gas stations, we are doing pretty good.”

Shah said he is confident the near future will bring a virus remedy and a return to normal. And he wants to be prepared when the upturn begins.  Seeing an opportunity in the low interest rates, Shah borrowed money and bought the Flash Markets for about $2.9 million, including the high-value land under the buildings. He’ll spend more on new canopies, signs, gasoline pumps, renovations and, for the store on Hickory Hill Road, a completely new building.

Normal and clean plant

A Kroger employee holds the corner of a banner outside of the food distribution warehouse where he works during a protest, calling for better protections of essential food supply chain workers, Wednesday, Jun. 10, 2020, in Memphis, TN.

Trey Cummings, general manager at National Filter Solutions, never slowed his plant down as the virus reared up in Memphis. The 24-employee shop distributes and services air and fluid filters. The devices keep unwanted particles out of offices, products and machinery in the region.

“On the filter side of things, we’re mission critical,” said Cummings, referring to the businesses whose employees stayed on the job after the pandemic began.

Food processors, for example, never closed. Demand for National’s filters stayed constant. What changed was the workplace.

Working surfaces in National’s plant are routinely cleaned with disinfectant. Employees’ temperatures are taken when they arrive. They are asked where they have traveled and whether anyone close to them has caught the virus. They wear masks. Most now work in two-member teams told to keep at least 6 feet away from other teams.

“Working in the teams has limited our ability to run more efficiently,” Cummings said. “That’s hit us on the profit side a little, but it’s worth it not risking a widespread situation in the company.”

Not normal at all

When hotels laid off workers as travel subsided, David Dierkes saw the impact immediately. Davene Inc., a Memphis supplier of trophies and other awards, cut down to 6 hours per day in May for some of its 6 employees.

Dierkes, sales director for the family-owned firm, immediately tried to find  new orders. Corporations such as hotel marketing-services giant Hilton Worldwide in Memphis buy the awards for recognition of worthy employees at company banquets. With hotels  sidelined, he wanted to make sure other clients were aware he was open and taking trophy orders.

“We sell mainly business-to-business,” Dierkes said. “It’s uncertainty every day for us. We’re finding through the grace of God we’re staying in business with enough orders to keep us going.”

Before the virus, he liked to make an appointment at a client’s office and drive over. But many firms shifted to a work-from-home policy. He rummaged through his files, found home phone numbers, began dialing.

“I was trying not to wait for someone to have to call me,’’ Dierkes said. “We’ve been doing business for over 30 years. I’ve built up a pretty good library of that kind of (home contact) information. It came down to the old-fashioned working the phone lines.”

Revenue is down about a third from last year, though he said it could have been far worse. Hilton Worldwide eventually ordered awards. So did other clients including a big order from FedEx, he said, following its unparalleled effort to keep cargo moving around the world in spite of the virus.

Taking a Zoom meeting

January 17 2019 - Stuart Harris, senior associate with SouthernSun Asset Management , speaks inside of The Commonwealth building during a bus tour hosted by the Downtown Memphis Commission. During the tour the Downtown Memphis Commission gave updates on many of the projects involved in downtown Memphis.

It would be normal for Michael Cook to cross the ocean and land in South Africa this week, head to Seoul next week and be back in his Memphis office the next week.

Of course, normal work travel is a now a thing of the past for Cook, chief executive of SouthernSun Asset Management, which oversees $1.1 billion invested primarily in about 40 companies located throughout the world.

Looking inside a factory, interviewing a chief executive and checking on supply lines were long part of normal face-to-face duties for SouthernSun’s seven globe-crossing analysts. Then the virus came on.

“We haven’t traveled since,” said Cook.  “We tended to spend a lot of time in the plants and facilities of the companies we own in our portfolio…. One of the eye openers for us has been how we can do (our jobs) without the travel.”

Video chat systems such as Zoom are now a regular part of the work day. While the video meeting can drain people compared to meeting in the same room, Cook said, no one has backed away.

 “The uniqueness of this situation is everybody is in same boat,” Cook said. “They realize you can’t travel. They can’t travel either.”

The virus came on as the 23-employee Memphis firm bought out a stake in SouthernSun held by a West Palm Beach, Florida, investment firm. Cook said plans to bolster SouthernSun’s Memphis infrastructure are continuing this summer.

Collierville merchant shuts down

Richard Holley (center) with his daughter-in-law Angie Holley (left) and daughter Kristen Acuff on Thursday, Aug. 13, 2020, at Happi-Stores in Collierville.

Merchants close for many reasons. Richard Holley had only one:  “We just can’t do it anymore.’’

Holley and wife Carol, had launched the Happi-Stores gift shop in 1975 in Memphis and expanded nationally. Years ago they sold off 41 franchise locations.

Then it all fell apart.

 Carol, his wife of 60 years, recently died. Kyle, their son, came down with a bad tooth. He died.  Shortly after the funerals the virus set in.  Any idea of selling the business faded. After all, sales didn’t rebound in July. Holley was the only family member left with a knack for running the store. He was tired.

He decided to close shop in September, a victim of the year of disasters.

Ted Evanoff, business columnist of The Commercial Appeal, can be reached at [email protected] and (901) 529-2292.

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