Long Island's public companies navigated pandemic lockdowns and snarled supply chains to forge ahead with overall gains in revenue and profit over the past fiscal year, according to new data, but experts warned of inflation challenges ahead.
The 62 companies on Newsday's list — led by perennial sales leader Henry Schein Inc. — notched cumulative revenue of $35.4 billion for fiscal 2021, according to S&P Global Market Intelligence, which compiled the data. That was a 14.5% increase over the prior year's $30.9 billion.
The picture is more nuanced, however, when 2021's 7% U.S. inflation rate — the highest since the 1980s — is factored into the equation, said Robert Goldberg, who teaches accounting, finance and economics at Adelphi University.
"If someone's sales are basically the same [in dollars], that means they've lost ground," he said. That's the case with 26 of the public companies, which saw year-over-year increases of less than 7% or outright sales declines.
The S&P database includes only publicly traded companies, which excludes major enterprises like not-for-profit Northwell Health, based in New Hyde Park. Northwell posted 2021 revenue of $14.5 billion. The health care system has 77,000 employees, making it New York State's largest private employer.
In the first half of 2022, companies have been facing further inflation pressure as labor and materials costs rise. Borrowing costs are increasing apace as the Federal Reserve raises interest rates to curb inflation.
In an indication of how rising prices are preoccupying corporate executives, the term "inflation" came up in 398 of the earnings calls of the S&P 500 companies from mid-March through May 24, according to researcher Factset.
Goldberg said that labor costs are a half step behind the inflationary cycle and workers will be increasingly vocal in seeking raises to keep their heads above water.
"Labor costs don't go up as quickly," he said. "Employees are now starting to clamor."
David Frisch, chief executive of Melville-based wealth management company Frisch Financial Group Inc., cited "a tremendous" labor shortage, which gives prospective employees leverage.
"We've been looking for a couple of people to add to the office," but candidates either lack a financial background or have no experience, he said. "Wages will continue to rise."
Those factors add up to a stark choice for companies: try to pass along price increases to customers or, if the company has the resources, absorb the financial pain.
"Microsoft can push along the extra [price] increase fairly easily, but you just saw Netflix — as dominant as they are — increase their cost, lose subscribers and their stock got crushed," Frisch said.
Such storm clouds could put Long Island's public companies under pressure on the heels of 12 months when their profits leaped a cumulative 38.6% to $3.7 billion.
Leader in profitability
Long Island's leader in profitability was Kimco Realty Corp., whose nationwide lineup of open-air shopping centers generated net income of $844.1 million.
Kimco reported sales of $1.5 billion, a 29.9% increase, making it seventh behind Henry Schein, Broadridge Financial Solutions, MSC Industrial Direct, 1-800-Flowers.com, The Hain Celestial Group and New York Community Bancorp. Rounding out the top 10 were Global Industrial (formerly Systemax), Verint Systems and Lifetime Brands.
Kimco's Long Island-leading profit came in lower than the prior year's $1 billion, but that was largely attributable to a one-time fiscal 2020 windfall from the Jericho company's investment in supermarket chain Albertsons Companies, which staged an $800 million initial public offering in June 2020.
A performance metric widely used for real estate investment trusts like Kimco is funds from operations. In 2021, Kimco, which has about 220 of its 606 employees on Long Island, reported an 18% increase in funds from operations to $707 million.
As employers adopted pandemic-induced work-from-home policies, creating uncertainty for some segments of commercial real estate, Kimco's strategy found a sweet spot.
Eighty-five percent of the company's portfolio is anchored by grocery, pharmacy and home improvement tenants, which remained open and in demand during the pandemic.
The shopping centers are concentrated in "first ring suburbs" of major metropolitcan areas such as Long Island.
Ross Cooper, Kimco's president and chief investment officer, said those properties have been a "tremendous asset class, particularly during the pandemic."
In addition to the staples at supermarkets and pharmacies, home improvement stores like Home Depot benefitted from a pandemic-driven surge in home remodeling.
Cooper said that many retailers also are fulfilling online orders in their stores, saving consumers from delays in receiving goods from distant distribution centers.
"It's very much in the playbook of the retailer to get the customer in the store," he said.
In August 2021, Kimco acquired Houston-based Weingarten Realty Investors for $3.9 billion in cash and stock, giving the combined company a stronger presence in the Sunbelt. As of March 31, the company owned interests in 537 U.S. shopping centers and mixed-use assets comprising 93 million square feet of gross leasable space.
Cooper said that Kimco is working on a new multi-use strategy to add hotels or multi-family housing units to existing commercial properties.
In "dozens" of markets, including the Town of Oyster Bay, Kimco is seeking clearance from government, he said. The Oyster Bay project would add an extended-stay Marriott Residence Inn to existing retail space.
Kimco management set a goal to build or have zoning changes and other approvals for 12,000 multi-use apartment units by 2025.
In some cases, the residential properties would be built in spaces currently used for parking. In others, commercial space would be repurposed, Cooper said.
Ranjini Venkatesan, an analyst with Moody's Investment Service, said that Kimco's shopping centers were "relatively unscathed" by the pandemic and voiced optimism on the company's foray into multi-family housing.
Still, Venkatesan said that macro-economic factors could create headwinds for Kimco if consumers tighten their belts.
"There's pressure on inflation and people's spending habits," she said. "That doesn't bode well."
Service providers dominate
Companies like Kimco, along with Henry Schein, a distributor of products used by dentists, and Broadridge, a provider of data processing and outsourced services to Wall Street, are representative of a Long Island economy that is dominated by service providers, distributors, technology, health care and financial companies.
Eleven of the 62 companies are in the health care sector, while 16 are in information technology, nine are financial companies and seven are in real estate. Eight are classified as industrials.
One of the companies categorized as part of the health care sector is Can B Corp., a Hicksville provider of CBD products derived from hemp. Can B has facilities in McMinnville, Tennessee, and Mead and Ft. Morgan, Colorado.
A handful of manufacturers remain on Long Island, including The Hain Celestial Group ($1.5 billion in sales), Lifetime Brands ($862.9 million), Veeco Instruments ($583.3 million), and Comtech Telecommunications ($581.7 million), but some or all of their production capacity is located abroad or elsewhere in the United States.
Major manufacturers, including Grumman Corp., an iconic aerospace company, Pall Corp., a maker of life sciences products, and Symbol Technologies, a barcode device pioneer, have been absorbed through mergers, in many cases shrinking or eliminating their Long Island presence.
"When you look at the [Newsday] list, very few actually manufacture anything," Frisch said. "That was something that hurt Long Island decades ago" as higher-paying manufacturing jobs were replaced by service jobs.
Many American companies moved their manufacturing to the Far East in pursuit of profits, but international frictions and snarled supply chains are making corporate America reassess the risks.
"You're talking about globalization," Frisch said. "The world enjoyed it for 30 years. ... It becomes problematic when you become reliant on products that are no longer available."
Frisch said the pendulum is swinging away from globalization back toward nationalism, which could allow the region to recapture some manufacturing capacity.
"Does Long Island need to bring back some manufacturing companies? Absolutely," he said.
How we compiled the list
Newsday's list only includes public companies that reported revenue in the trailing 12 months, eliminating almost all special-purpose acquisition companies. SPACs, also known as blank-check companies, are created as shell companies that raise money via a stock offering and then seek an operating company to acquire.
The stock market performance of Long Island's public companies was measured as of May 6, when major market averages including the S&P 500 were in the midst of a major downturn. After opening the year near 4,800, the S&P 500 plunged to 4,124 by May 6.
That was reflected in the 18.4% decline in the 62 Long Island stocks for the previous 12 months.
The company with the largest increase in sales — 883% — was Uniondale-based Angion Biomedica, a development-stage drugmaker whose revenue climbed to $28.3 million. Angion, however, also recorded the second largest net loss in the trailing 12 months at $54.6 million.
The largest loss was the $73.5 million deficit posted by Comtech Telecommunications, a maker of sophisticated communications gear and 911 systems.
Twenty-six of the 62 companies are in Suffolk County with the remainder in Nassau, according to S&P.
Aerospace contractor CPI Aerostructures, No. 22 on the revenue list, had yet to file its 2021 annual report with sales and profit data. Data for 2020 and 2019 were substituted to allow the Edgewood company to be included.
Beyond Newsday's regional ranking, 1-800-Flowers for the first time cracked the Fortune 1000 (at No. 997) of the largest U.S. companies based on total revenue over the most recent fiscal year. The e-commerce gift company joined No. 608 Broadridge Financial and No. 790 MSC Industrial Direct, which made repeat appearances on the list. Henry Schein, No. 299, returned as the lone Long Island representative in the Fortune 500.
LI's Top 10 Public Company Employers
The 62 Long Island public companies on Newsday's list together employed 71,196 in fiscal 2021, a 5.9% increase from the prior year's 67,229 employees.
The top employers:
- Henry Schein, 21,600 workers
- Broadridge Financial Solutions, 13,704
- MSC Industrial, 6,472
- 1-800-Flowers, 4,800
- Verint Systems, 4,400
- The Hain Celestial Group, 3,087
- New York Community Bancorp, 2,815
- Comtech Telecommunications, 2,038
- Global Industrial, 1,480
- Lifetime Brands, 1,350
Source: S&P Global Market Intelligence, Securities and Exchange Commission filings