Up and down goes the Dow and up and down go the confidence, future plans and blood pressures of Atlanta’s CEOs.
Wednesday’s rise and fall of the stock market -- down an agonizing 520 points -- further flummoxed many an executive trying to divine the nation’s (and their company’s) economic future. A week’s whirlwind of market gyrations, deficit gymnastics and European financial contortions has steeled even the most sanguine of market watchers.
Cynthia Kaye sells educational and security technology to schools. Her 17-year-old Lawrenceville company kept growing through the recession. Logical Choice Technologies, with 230 employees, is seeking another eight employees. Additional job postings, though, are likely on hold.
“My thinking has started to change toward more conservative as I watch the news over the last 48 hours,” Kaye, the company founder and CEO, said Wednesday. “Maybe we won’t hire as aggressively; maybe we’ll slow that down a little bit.”
Like the market itself, though, different industries and businesses react differently to the day’s news. After four years of a mostly lousy economy, the Dow’s 11.7 percent drop in value over the past week is yet another reminder that happy days won’t be here again for quite some time.
“Whatever the outlook was, it’s a little more guarded now in terms of what to expect,” said Dennis Fink, chief financial officer of Atlanta’s Haverty Furniture Cos., which reported slightly lower second-quarter sales last week. “We don’t see the next year or two as a great expansion opportunity.”
It’s understandable, particularly in Atlanta, that a retail business dependent upon home-buying and credit availability wouldn’t cringe at the latest round of bad economic news after adjusting their business to the new economy. However, other publicly traded companies whose stocks have taken a beaten lately have tucked their tails.
Dominic Mazzone, managing director of Mazzone & Associates, an M&A advisory firm in Buckhead, said a potential buyer for a large Midwestern retailer is getting cold feet.
“They may walk away from the deal because their share price took a hit,” Mazzone said. “A decrease in their stock price has an implication for the amount of capital they have to put to work.”
But Mazzone cautions against overreacting to the market. The Dow, after all, is up 76 points since Aug. 11, 2010.
“You can’t run your business by watching your stock price,” he said. “The fact that the market corrects itself based on global and macro-economic news should [instead] impact a company’s business.”
Logistics giant United Parcel Service in Sandy Springs agrees.
“The current market volatility has not caused UPS to do anything differently,” said spokesman Norman Black, adding that a slight increase in package deliveries during the second quarter won’t translate into new jobs. “Now, we do worry about the bigger picture of whether the market gyrations are signaling problems with the broader economy, which in turn could affect business growth,” he said.
Small business owners worry about the same macro-economic trends as the big boys. Rich Clark, who owns the upscale C&S Seafood Oyster Bar in Vinings, reworked his menu Wednesday and cut back employees’ hours.
“We’re taking off a few of the higher ticket items,” Clark said. “We’re doubling the amount of salads, doubling the amount of sandwiches and actually changing a couple of portion sizes so we can offer it at a little lower price.”
Stock market volatility isn’t to blame, the restaurateur said, as much as the drumbeat of bad economic news, unemployment and European debt woes.
“That negative financial news affects me more than two bad days on the stock market,” Clark said.
A psychology of pessimism, where bad news piles upon bad news, prevails. Enough already, pleaded Mark Stewart, director of investments for Atlanta’s Batson-Cook Development Co., a development firm that also manages some retail properties.
“I feel like this is a lot of smoke and mirrors,” Stewart said. “A lot of what we’re seeing is financial traders trying to make money in a down market. Retailers say sales are better in the last six months than this time last year. And tenants are paying their rent and not asking for rent concessions.”
Some companies are even hiring, albeit cautiously. Beth Herman, regional director for Manpower staffing agency, said CEOs of logistic companies and call centers remain bullish enough to add employees.
“I can’t say any of my clients have called and said, ‘Oh, Lord, the floor has fallen through. Get rid of all my contingency labor,’" she said. “Personally, though, they’re freaking out because they’re taking a big hit on their own portfolios.”
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