I’m looking at lists of big companies, and what they say about the Memphis economy is not good, particularly if you are an investor.
The first one is The Wall Street Journal‘s annual list of “The Best and Worst Performers of the WSJ 1,000” public companies in 75 industries over the past year and the past decade. The list includes “leaders and laggards.”
The second list is the Memphis Business Journal‘s 2008 Book of Lists of the 50 largest public companies in Memphis. Several names from this list are also on The Wall Street Journal’s list, and, unfortunately, most of them are laggards.
And not just ordinary laggards, either. Leading laggards, you might say.
Memphis-based companies such as First Horizon National Bank (-55 percent), FedEx (-17.7 percent), and International Paper (-2.4 percent) were losing investments in 2007. So were other companies with a lot of employees and offices in Greater Memphis, such as Regions Financial (-34.7 percent), Tenet Healthcare (-27 percent), Boyd Gaming (-23 percent), and Medtronic (-5 percent).
All of those are among the 20 largest public companies in Memphis and have at least 1,300 local employees. The second tier, ranked 21-50, didn’t do much better. It includes UPS (-3 percent), Target (-11.8 percent), Home Depot (-31 percent), Williams-Sonoma (-16 percent), Macy’s (-31 percent), SunTrust Banks (-24 percent), and E.W. Scripps (-9 percent).
Wal-Mart (+4.4 percent), AutoZone (+3.8 percent), Harrah’s Entertainment (+9 percent), and Nike (+31 percent) managed gains, as did the Dow Jones Industrial Average (+8.9 percent) and Standard & Poor’s 500 (+5.5 percent).
Some of the best known Memphis companies, such as Northwest Airlines (number 14 on the MBJ list), didn’t even make the Journal rankings because their market value doesn’t put them in the top 1,000. And the news from Northwest is likely to get worse, at least for Memphis, if it merges with Delta and consolidates operations in Atlanta or eliminates the Memphis hub.
Lists are a dime a dozen and often silly these days — fattest city, dumbest city, coolest city, etc. But these two lists matter. First Horizon and Regions (parent of Morgan Keegan), which were near the bottom of the bottom industry group — banks — employ more than 4,700 people and are the bastions of the Memphis skyline. Their fall was so bad in 2007 that it made their 10-year return negative. The same is true of International Paper, a Fortune 500 company and the city’s biggest corporate catch of the last 20 years. In other words, if you bought $10,000 worth of their stock in 1998, you now have less than $10,000.
First Horizon and Regions made bad investments related to real estate and subprime mortgages and booked huge losses last year. They didn’t just lag the market, they lagged their peer group of banks by a wide margin. And they did it with a base in the Southeast, which has enjoyed a boom in real estate, population, and automobile manufacturing over the last generation. You have to wonder how much longer they can remain independent — or how low the price will go before someone acquires them.
Last Saturday, The New York Times used Memphis as the poster child for a long story about the mortgage crisis. The story said there hasn’t been so much “nervousness” on the part of homeowners since the Depression.
The long view is better in other sectors. FedEx, with an estimated 30,000 local employees, has a 10-year average return of 11.7 percent. The second largest private employer in Greater Memphis is Wal-Mart, with 6,000 employees and a 10-year average return of 10 percent. But nobody thinks of Bentonville-based Wal-Mart as a Memphis company. Harrah’s, which moved its headquarters from Memphis to Las Vegas, has averaged 18 percent a year for the last 10 years. But most of its regional employees are at the casinos in Tunica. AutoZone, which may be the last bright light on the Memphis skyline, has a 10-year average return of 15 percent.
What’s also troubling for Memphis, however, is that it boasts almost no presence in The Wall Street Journal‘s “honor roll” of top performing industry groups — computer hardware, mining and minerals, oil and gas, semiconductors, aerospace, energy, and software. Only in gambling, medical supplies, and trucking can Memphis claim a significant number of jobs and growing companies.
The top-performing industry group for the past five years is travel and tourism. Memphis is betting heavily on Graceland, FedExForum, the airport, Bass Pro, and Beale Street. Not exactly Dell, Nissan, Toyota, Apple, and Schering-Plough.
