Yes, I’m Pregnant. So What?

The founder of Knixwear set the ground rules when she went looking for investors.

Good morning!

Today’s highlights: It’s actually not the vaccinated consumers who are driving the recovery. And the surge in U.S. travel has begun. But we should still expect an avalanche of business bankruptcies.

FINANCE

Last fall, when Joanna Griffiths, founder of Toronto-based Knixwear, decided to raise investment capital, she set the ground rules. Any potential investor who expressed concern about her being visibly pregnant with twins would be eliminated from consideration: “Knix, which sells women’s underwear and apparel, saw its sales jump to $75 million in 2020 from $50 million in 2019. In the past 12 months, as of mid-May, sales have hit $100 million. But Ms. Griffiths also knew that female entrepreneurs still grapple with systemic bias from venture capitalists, including questions about their dedication to the business if they choose to have children. So as Knix’s investment bank, Robert Baird & Co., started the process, she drew a line in the sand. A ‘small number’ of prospective investors were ruled out, she said.”

  • “On Tuesday, Knix is announcing it has raised $53 million in the funding round, led by New York-based private-equity firm TZP Group, and including some existing Knix investors such as Germany’s Acton Capital. Supermodel Ashley Graham has also invested. Ms. Griffiths remains the largest shareholder.”

  • “Knix plans to use its share of the proceeds (roughly one-third is going to buy out some early shareholders) to fuel an ambitious growth plan, including expanding further into the United States, opening more bricks-and-mortar stores, and launching more product categories. The company plans to hire 200 people in the next two years; it currently has roughly 125 employees.”

  • “Knix began with a crowdfunding campaign in 2013, to launch a line of leak-proof underwear. Knix built customer loyalty as it sold its products online in Canada and the U.S., by talking openly about the reality of women’s bodies—in contrast to industry giants such Victoria’s Secret, which for years treated menstruation and leaks as an unmentionable blight on the sexy, size-zero ideal they advertised.” READ MORE

HUMAN RESOURCES

Most employers are shying away from mandating vaccines—but not all: “The email set out an ambitious and uncompromising goal: Get vaccinated or get ready to find another job. ‘We must lead by example and get vaccinated ourselves,’ Houston Methodist CEO Marc Boom wrote to his managers on March 31. Boom’s vaccine mandate is among only a handful issued by health-care institutions in America. While more than 380 colleges and universities, generally in blue states, and a few travel companies have imposed vaccine mandates, most other employers have held back, worried about the difficult politics surrounding the coronavirus vaccines and the untested legal issues involving vaccines cleared under the Food and Drug Administration’s emergency authority.”

  • “Boom’s mandate worked — more than 98 percent of the hospital’s 26,000 employees are now vaccinated ahead of a June 7 deadline, including more than 3,000 who got the shots after Boom’s call to action.”

  • “But the hospital chain fired its director of corporate risk and insurance for refusing to get inoculated, and it is now facing a broader backlash.”

  • “Several employees are vowing to skip the shot, rallying around Jennifer Bridges, a nurse who has worked in the hospital’s coronavirus unit and who is threatening to sue.” READ MORE

THE ECONOMY

It’s not the vaccinated who are driving the recovery: “Vaccinated consumers were less likely to go out to restaurants, salons and entertainment venues than those who don’t plan to get the vaccine, April spending and survey data from market-research firm Cardify.ai show. The vaccinated are ‘proceeding with cautious optimism,’ said Derrick Fung, chief executive of Cardify. ‘They’re still not really comfortable doing live entertainment where there’s crowds of people.’ People who aren’t vaccinated, on the other hand, tend to be more risk tolerant and are already living a relatively normal life, Mr. Fung added. ‘As places open up, they’re the ones leading the charge.’”

  • “Spending at entertainment venues was up 20 percent among consumers who don’t plan to get the vaccine in April compared with January 2020.”

  • “It was up just 10 percent among vaccinated people during that same period, according to Cardify.”

  • “Visits to airports, hotels and theaters in less vaccinated states had recovered in April to 71.2 percent of pre-pandemic levels versus 52.7 percent in more vaccinated states, Earnest data show.”

  • “Gym visits had bounced back to 87.3 percent of pre-pandemic levels in less vaccinated states versus 68.5 percent in more vaccinated states.” READ MORE

And yet, the expected surge in U.S. travel is already arriving: “With international travel still so restricted (though the European Union on Wednesday took a step toward opening its borders to vaccinated tourists) and business travel still only a fraction of what it once was, you’re not going to get anywhere close to full 2019 restoration. And yet to only be down 35 percent without those two huge travel components shows just how strong the domestic travel surge is now that more people are vaccinated. Indeed, the fact that TSA has screened more than 24 million travelers so far this month, compared with 3 million in the same period of last year, is solid evidence of solid recovery. But it’s still not the 38 million of 2019.”

  • “The average round-trip ticket sold through early May for summer travel was $408. That’s only $18 cheaper than the average round trip for summer trips sold in the same period of 2019, according to Airlines Reporting Corp., which processes tickets sold by travel agencies.”

  • “‘While average fares are still a slight bargain compared to 2019, that savings is rapidly disappearing, and seats to popular destinations are filling up quickly,’ ARC said.” READ MORE

Rising prices and the Trump tariffs are generating an improbable comeback for the steel industry: “Steel prices are at record highs and demand is surging, as businesses step up production amid an easing of pandemic restrictions. Steel makers have consolidated in the past year, allowing them to exert more control over supply. Tariffs on foreign steel imposed by the Trump administration have kept cheaper imports out. And steel companies are hiring again.”

  • “In early May, futures prices for 20-ton rolls of domestic steel — the benchmark for most steel prices nationwide — pushed above $1,600 per ton for the first time ever, and prices continue to hover there.”

  • “Although producers are rejoicing, the price increases are painful for consumers of steel. At its Plymouth, Mich., plant, Clips & Clamps Industries employs roughly 50 workers who stamp and form steel into components for cars such as the metal props that are used to keep the hood open when checking the oil.”

  • “‘Last month, I can tell you, we lost money,’ said Jeffrey Aznavorian, the manufacturer’s president.” READ MORE

The worst of the pandemic may be over, but many businesses face a reckoning: “As relief efforts like the Paycheck Protection Program wind down, and state and federal protections such as eviction moratoriums begin to lapse, companies that may have been limping along or on the edge could soon topple. Or as Bob Keach, head of Bernstein Shur's business restructuring and insolvency practice, puts it: ‘Expect a total avalanche of bankruptcies soon.’ It sounds counterintuitive, but ‘filings tend to be at their highest during the early stage of the recovery,’ says Keach.”

  • “In periods of stagnation—particularly at the bottom of an economic curve—not a lot happens because not a lot can happen, Keach explains. Lenders aren't being altruistic by allowing you to delay making payments; they want to get paid. (There's an industry term for it: extend and pretend.)”

  • “But because their hands may have been tied during the pandemic by authorities or because they know it might be a PR boondoggle to force a company to liquidate during a crisis, they hold off, says Keach. Given time and an easing of conditions, they'll act.” READ MORE

LOGISTICS

Yes, there’s another shortage looming, and this time it’s serious: “The advent of legalized adult-use marijuana in New York and New Jersey is an entrepreneur’s dream, with some estimating that the potential market in the densely populated region will soar to more than $6 billion within five years. But the rush to get plants into soil in factory-style production facilities underscores another fundamental reality in the New York metropolitan region: There are already shortages of legal marijuana. Within New Jersey’s decade-old medical marijuana market, the supply of dried cannabis flower, the most potent part of a female plant, has rarely met the demand, according to industry lobbyists and state officials. At the start of the pandemic, as demand exploded, it grew even more scarce, patients and business owners said.”

  • “‘There’s very little stock,’ said Shaya Brodchandel, the chief executive of Harmony Foundation in Secaucus, N.J., and president of the New Jersey Cannabis Trade Association. ‘Almost no wholesale. As we harvest we’re putting it straight into retail.’”

  • “Because marijuana is illegal under federal law and cannot be transported across state lines, marijuana products sold in each state must also be grown and manufactured there.”

  • “Oregon, which issued thousands of cultivation licenses after legalizing marijuana six years ago, has an overabundance of cannabis. But many of the other 16 states where non-medical marijuana is now legal have faced supply constraints similar to those in New York and New Jersey as production slowly scaled up to meet demand.” READ MORE

STARTUPS

The founders of Peapod have a new startup that can tell you what exactly is in your food: “Sifter, founded by brothers Andrew and Thomas Parkinson, is a grocery shopping platform that lets you search for products based on your diet and medical needs. Users can set up a profile on Sifter that identifies any specific allergies, dietary restrictions, medical history and other factors, and they can search Sifter's platform for food items that are safe to consume and fit their lifestyle. Users can also drop in a link from any recipe online, and Sifter will tell you if the ingredients are safe, and where to buy the products online.”

  • “Once users are ready to check out, Sifter connects them to one of its grocery partners, which so far includes Walmart, Amazon, Target, Walgreens, Stop & Shop, Giant and Kroger-owned stores.”

  • “Sifter is free for shoppers. It collects a fee when you buy a product through one of its affiliate partners like Walmart or Amazon, and it charges food brands to advertise on its platform.” READ MORE

PROFILE

Here’s how a Black-owned bookstore survived the pandemic (and Amazon) in Newark: “Mr. George counted 30 customers killed by the coronavirus. Almost 1,000 people have died in New Jersey’s largest city because of Covid-19 and the vaccination rate remains below 30 percent. Throughout the pandemic, Mr. George considered not only safety concerns, but also the costs of closures and curfews. He weighed reduced foot traffic against his mortgage of $6,500 per month for the two-story building that houses his bookstore. On his commute, he noted roller gates that remained down and ‘For Lease’ signs going up. But Mr. George was not done building. Early in the epidemic, he created a GoFundMe page to alert customers to his status: ‘Covid almost killed us!’”

  • “While Black business ownership rates nationwide dropped 41 percent from February 2020 to April 2020 — the largest decline for any racial group — Mr. George watched as 1,200 patrons donated $69,211 to support his 30-year-old enterprise.”

  • “By summer, he closed off half the store and planned an expansion. Sawdust mixed with incense as he knocked down walls, raised the ceiling, transformed an elevator shaft into an office and relocated the cash register from under the stairs.”

  • “His second-floor tenant, Walm N’Dure, extended the fitness center he runs to the roof, configuring a rock-climbing course replete with netting and a retractable awning.”

  • “For quiet, Mr. George, who has battled anxiety since he lived in Tobago, retreated downstairs to complete his most fulfilling work: framing art. After teaching himself the craft and spending $100,000 on a joiner and cutters over the years, he has become a skilled framer. On the awning outside his shop, he advertised his services for one-hour custom services.” READ MORE

MORNING REPORT AUDIO

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