Face Masks Were Booming Until They Weren't
(Bloomberg Opinion) -- Face masks were the most ubiquitous visual symbol of the Covid-19 pandemic, but they’re fading from sight as more and more people get vaccinated. Roughly 177 million Americans — or 68.7% of the adult population — have received at least one dose, according to Bloomberg’s Vaccine Tracker. New York and California, two of the hardest hit states in the early days of the pandemic, lifted virtually all pandemic restrictions earlier this month after hitting key vaccination benchmarks.
The U.S. Centers for Disease Control and Prevention still recommends that unvaccinated individuals wear masks, and even those who are vaccinated have to cover up on planes, buses and trains and in public transit hubs. But across American offices, restaurants and stores, it’s now more common to see actual faces than a sea of masks. And for those situations where masks are still required, most people already have a sufficient supply for their household (including the reusable variety) and aren’t buying many new ones.
That’s fundamentally good news and signals a return to a more normal economy. But Americans’ broad abandonment of face masks has ramifications for the industrial companies that aggressively stockpiled inventory and ramped up production to meet the pandemic needs.
There’s been a glut of three-ply and cotton masks for months now. Industrial distributors MSC Industrial Direct Co. and Fastenal Co. wrote down $30 million and $8 million of disposable mask inventory in the most recent quarter, respectively, as demand waned and prices collapsed. Hanesbrands Inc. was one of the many clothing manufacturers that entered the face mask market during the pandemic. Last July, then-Chief Executive Officer Gerald Evans Jr. predicted masks would be with us “for some time” and that this would be as much as a $300 million business for the company going forward. By February, Hanesbrands said it no longer viewed personal protective equipment as a long-term growth opportunity and took a $400 million charge tied to the writeoff of its entire inventory.
Even the gold-standard N95 masks that feature high-grade filters aren’t as hot of a commodity as they used to be. Honeywell International Inc. said earlier this month that it would shut down two N95 mask facilities it set up in the U.S. during the pandemic, with a spokesman citing a “dramatic reduction in demand.” Lydall Inc. makes filtration material for N95 and surgical masks, but there wasn’t a single mention of masks in the Monday press release announcing its sale to Unifrax, a specialty-materials company backed by investment firm Clearlake Capital Group. Unifrax offered $62.10 a share for Lydall, almost 90% higher than where the stock closed last week, but that rich premium appears to be based on the growth opportunities for indoor air filtration and heat and noise-abatement products used in electric-vehicle development.
3M Co., the largest maker of N95 masks, could be next to confirm the trend. The company ramped up its factory capacity with the help of $200 million in federal contracts and is on track to produce 2.5 billion N95 masks globally this year. 3M executives have said that needs are waning in certain U.S. and European markets but that governments in those countries are interested in stockpiling the respirators so that they’re more prepared when the next pandemic hits. Demand is also still elevated in other parts of the world where infection rates remain high and the vaccination pace is slower. But “we're prepared to adjust our respirator output to meet the market demand,” CEO Mike Roman said at the Bernstein Strategic Decisions conference earlier this month. Watch the company’s earnings release in July for more detail on this front.
Some have wondered whether face masks might stick around after the pandemic — if not as a daily accessory, then at least as a protection against viruses in crowded venues during the winter. That may indeed happen. But the business of face masks? As with most pandemic trends, it’s helpful to follow the money. That trail is going cold.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.
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