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Back to life, back to reality for consumer services

It's been a long time coming but the consumer services sector has finally come in from the cold and deserves a ticker tape parade. The economy is recovering alongside improved consumer sentiment, which is bringing growth back for many pandemic-beaten consumer services companies.

Fifteen consumer services businesses have exited the Debtwire Distressed Watchlist so far this year, putting the industry above all others except the energy services sector, which saw 36 watchlist departures.

Bond life

A look at the bond performance of these former laggards underscores their fortunes. A sample of five consumer services businesses—ClubCorp Holdings, Diamond Resorts International, AMC Entertainment Holdings, Gateway Casinos and Downstream Casino Resort—shows that three have outperformed the S&P US High Yield Corporate Bond Index so far this year, with an average return of 7% compared with the index's 3.6%.

Redditors' favorite AMC comes out on top with a weighted average 20% increase in its bonds this year. Moviegoers rejoiced when the company reopened its entire cinema chain in March and the stock has been on a wild ride this year, being among the most popular picks on Reddit's Wall Street Bets forum alongside Gamestop. But its eye-watering stock performance is not mere market manipulation.

AMC’s second quarter revenue recorded US$444.7 million—up US$425.8 million on a disastrous Q2 last year and by as much as US$296.4 million on the first quarter of 2021—as Americans returned to the big screen, popcorn in hand.

Spend it like you mean it

Whether it's cinema chains or casino resorts, things are looking up for all and sundry. The consumer services sector outgrew every other industry in July, according to the Global Sector PMI published by IHS Markit. Drilling down, tourism and recreation specifically grew more rapidly than any other area of the US economy.

While concerns linger over the Delta variant and President Biden's target of vaccinating 70% of the adult population by July 4 has been missed, progress has been made. By mid-August, more than half of Americans had been jabbed, encouraging people to venture out and dine, travel and make merry with friends and family. Wallets and purses are also slowly recovering.

Personal income edged up 0.1% in June, equivalent to US$26.1 billion in extra earnings, according to the latest estimates from the Bureau of Economic Analysis. Personal consumption expenditures were up by 1% over May to US$15.8 trillion, while expenditures on services increased 1.2% to US$10.3 trillion, led by food services and accommodations.

Americans have money and they aren't afraid to spend it. For consumer services companies, it's a welcome and long-awaited blessing.