Investors like to own companies that offer strong assurance of growth and a good night's sleep. Those can be hard to come by, especially during times of economic stress. The COVID-19 pandemic has plunged the world into a sharp downturn while decimating demand for goods and services across a variety of industries such as airlines, cruise companies, and hotels.
This crisis has also shown how some businesses can cope better than others. With lockdowns and movement restrictions implemented in numerous countries, brick-and-mortar shops and malls suffered from plunging foot traffic. However, businesses with strong franchises, a digital presence, and adaptability to new trends ended up taking market share away from companies that floundered. These resilient businesses are the ones that will come out unscathed from the pandemic, or even grow stronger as a result of it.
Here are two such stocks that possess these attractive attributes. These are names you can plan to own for generations.
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Starbucks
Starbucks (SBUX -1.02%), one of the largest global coffee chains, was hit by worldwide store closures as the coronavirus swept around the globe. These store closures peaked in April, and by the end of July, approximately 97% of Starbucks' global company-operated store portfolio had reopened, while around 87% of its global licensed store portfolio is now open.
CEO Kevin Johnson detailed in the company's earnings conference call new store operating protocols and service channels that boosted the contactless experience for customers. These steps included drive-throughs, mobile order and pay, and delivery. The ability to include these options enabled weekly U.S. comparable-store sales to improve steadily through the quarter, from a nadir of minus-65% in mid-April to minus-16% at the end of the third quarter.
These new store formats have been modified to adapt to the pandemic, and Starbucks is confident that customers will continue to prefer contactless payments even after the crisis has abated. The company's digital footprint has given it a clear competitive edge; the third quarter saw significant growth in the number of customers who downloaded the Starbucks app and joined Starbucks Rewards, totaling 3 million and up 17% from the second quarter.
Management is not resting on its laurels, though. The company plans to launch curbside pickup in several hundred existing locations and add over 50 Starbucks Pickup locations in the next 12 to 18 months, accelerating the pace of change in store formats to build on its existing momentum. These initiatives demonstrate management's resolve toward adapting the business for a post-pandemic future and will allow the company to continue to grow in a sustainable manner.
Visa
Visa (V 0.05%), one of the world's largest financial services corporations, with a long track record and a strong brand name, saw the pandemic negatively affect its business. Total transactions fell by 14% year over year in the third quarter, while cross-border volume was still down 38% year over year even though lockdowns in many countries were lifted. However, this trend is likely to be temporary, as processed transactions have continued to improve steadily since April. In mid-April, processed transactions were down 30% year over year, but by late July, things improved to flat year over year.
CEO Alfred Kelly, in the company's latest earnings conference call, highlighted a few trends that will benefit Visa over the longer term. One of these is the shift toward contactless payments as the pandemic has made more people eschew handling cash and checks. Visa has witnessed a strong surge in both interest and usage in tap-to-pay and has helped more than 55 countries to increase their tap-to-pay limits. In the U.S. alone, the company added more than 80 million contactless cards in the first half of 2020 and sees the tap-to-pay trend accelerating post-crisis as people's habits become permanently altered.
A second positive trend has been that of e-commerce and digital payments. This is advantageous for Visa as its share of digital commerce is around three times greater than physical points of sale. All around the world, both e-commerce transactions and average spend have increased year over year. The acceleration in adoption of digital payments bodes well for Visa's prospects as it plays into its strengths, and it helps to ensure consistent, steady growth through the pandemic and beyond.
