Failure is an essential part of any business endeavor. After all, it’s how businesses learn. But when your failures outnumber your successes and nothing changes… you’re in deep trouble.
Zombie companies are experiencing just that. These are giant companies floundering beneath the weight of terrible business moves.
But what makes a company a “zombie” and more importantly…
Do they have any hope?
Beyond The Grave: Zombie Companies
Zombie companies are businesses that have taken on so much debt that they are one bad hit away from collapse.
Oftentimes, these brands are drowning under so much debt that they can’t even afford the interest on their loans.
IN THE U.S. THERE ARE OVER 2000 ZOMBIE COMPANIES, BRANDS ON THE VERGE OF BANKRUPTCY… A 14-YEAR HIGH!
As for the rest of the world, over 130 million people are working for zombies…
This puts those employees in dangerous waters if any of these companies don’t make it.
The main problem that zombie companies face is insufficient cash reserves. Most of the loans these businesses have taken out have variable interest rather than fixed interest…
Meaning they are feeling the pressure from the loans NOW.
To make matters worse, due dates are coming up.
Investors that still trade in the stock of these companies provide a short-term cash boost, which can provide some aid…
But it’s usually not enough for substantial change. Plus, it’s not a very lucrative investment for traders.
Take Gamestop’s stock for example: investors were able to inflate their stock price in moments before it all came crashing down.
As for what the zombie companies did with these giant loans…
They mostly used the new influx of cash for stock buybacks instead of investing it back into the business.
Clearly, these brands had lost their focus…
Right now, zombies are in a world of trouble. Their biggest solutions?
Refinance or wait until the feds cut interest rates (which doesn’t seem like it’s going to happen anytime soon).
Until some miracle occurs…
Here are some companies that have joined the walking dead.
Bed Bath And Beyond
After years riddled with losses, Bed Bath and Beyond finally closed its doors for good in 2023, putting thousands out of work.
BUT THAT WASN’T BEFORE SOME MAJOR BUSINESS FAILS.
One of the company’s major missteps through the years was avoiding the switch to digital sales…
Putting them massively behind their competitors.
This zombie company also fell victim to the trap of stock buybacks, except in their case…
They used stock buybacks to boost CEO pay. Pay for top executives flew up to over $140 million…
AT THE SAME TIME THE COMPANY’S STOCK PRICE WENT FROM $80 PER SHARE TO AN EVEN 0
All in all, the company spent over $7 billion on stock buyback in just 10 years.
Makes it no surprise that the retailer had to close their doors after 50 years in business.
JetBlue
Similarly to other airlines…
JetBlue struggled heavily when the pandemic all but stopped any air travel for over a year.
This zombie company was forced to take out loans to help them buy time while Covid raged on…
But that doesn’t explain all the debt the company took on BEFORE the pandemic.
In the past 10 years, the company managed to double its debts.
While their attempts to do some damage control did result in cutting costs throughout the company…
AT THE MOMENT JETBLUE DOESN’T HAVE ENOUGH TO PAY THE $717 MILLION INTEREST ON THEIR LOANS.
And in the face of recent controversies, it doesn’t seem like customers are too eager to fly with this airline any longer.
Soon, JetBlue might need to save themselves from a crash landing.
Peloton
Pandemic darlings Peloton has been staring death in the face in the years after its quick rise to popularity.
Peloton is probably in the worst condition since this zombie company has taken more debt than it knows what to do with.
IN 5 SHORT YEARS, PELOTON HAS QUADRUPLED THEIR DEBT, LEAVING THEM WITH OVER $2.3 BILLION OWED.
Stocks for the brand went from hovering at a high of $170 per share to a measly $3.54.
While the company is attempting a rebrand into fitness content rather than fitness hardware…
It might be too late to save this company from its fate.
Can These Zombie Companies Get A Second Shot At Life?
It seems that the odds are all stacked against the zombie companies.
Unless by some miracle, the Fed cut interest rates…
It’s increasingly unlikely that these businesses will come out the other side unscathed.
If there’s anything to learn from this…
It’s to learn that if things don’t work the first time around…
Trying, trying, and trying again could cost you big time.
Be Great,
GCTV Staff
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