Important Updates On Resources From The Small Business Administration Available To Businesses Affected By COVID-19
Please click below for an update on legislation the U.S. Senate is considering to help small businesses during the COVID-19 outbreak.
March 18, 2020 Update On Treasury And IRS Issue Guidance On Deferring Tax Payments Due To COVID-19 Outbreak
The National Fireworks Association (and its over 1200 members) represent the interest of the fireworks manufacturers, importers, and sellers on a national level before Federal lawmakers and regulators. We also promote safety as the lynchpin of the industry. The NFA believes in using sound science to promote the safety of pyrotechnic devices, and we serve as a voice for the millions of Americans who use our products.
The Coronavirus has impacted fireworks manufacturers, importers, distributors and retailers, and without appropriate regulatory and potentially legislative relief, the virus will have dramatic consequences on the upcoming 2020 fireworks season and the small businesses that import, distribute and sell fireworks.
The NFA, along with our Washington, D.C., team, is continuing to make the case to the appropriate legislative and regulatory bodies to advocate for our industry:
There is a real concern about the deliverability of fireworks inventory that gets produced and shipped to the U.S. from China. We need Congress to ensure that U.S. ports are receiving these container ships and are prioritizing their inspections to clear containers quickly.
Fireworks are a “hyper-seasonal” product that the industry needs for July 4th. It would be dreadful if the ports received a large, immediate, inflow of containers full of fireworks, and they were not properly prepared to process them. Not having products would create additional and potentially catastrophic delays, preventing product from getting out of the ports and into the shops and warehouses.
The reason we have been advocating is because the effects of the Coronavirus are across the board. The 1.3G and 1.4S professional fireworks industry, as well as the 1.4G consumer fireworks industry, will be hurt financially. The effects of the virus on manufacturing and the supply chain from China are still unknown. Unfortunately, the virus outbreak comes on the heels of an accident that occurred in December of 2019, resulting in the closure of all fireworks factories by the Chinese government. This is normal procedure when an accident of this nature occurs.
The Chinese government then implemented strict new procedures and safety requirements to ensure a safe manufacturing process. While closures due to safety have occurred in the past, they have never coincided with a viral outbreak that occurred during the time of year when travel throughout China is at its peak, as factory workers return to their communities to gather and celebrate the Chinese lunar new year. This only exacerbated an existing production shortfall and has developed into a major problem.
What we know:
- There will be shortages in the fireworks supply chain this fireworks season, causing a negative impact on our industry.
- Inventories arriving in U.S. ports will be coming in later than usual, creating backlogs and additional delays – potentially into late Spring.
- Fireworks, particularly those on the consumer side, are “hyper-seasonal,” meaning virtually all of a single year’s revenue for a significant portion of the industry happens within a 3 to 4-day span right around the 4th of July. There is no other industry that faces such a “hyper-seasonal” business model.
Potential impacts for 1.3G and 1.4S professional fireworks:
- Decreased supply from China will likely lead to increased costs, as companies have to source other countries for supply.
- While large display shows celebrating Independence Day are expected to continue, there may be fewer shells shot as budgets remain flat. Most large display companies do carry significant inventories year to year, but for this year’s supplies, they may have to use premium shell sources. The shells will be better but will cost more. That means that without increased budgets, fireworks shows could see fewer shells shot.
- Small community display shows may suffer more or not happen at all. Typically shows such as these are carried out by smaller display companies that may not have a large carryover inventory. The shortages of supply this year could prove particularly harmful.
Potential impacts for 1.4G consumer fireworks:
- Decreased supply from China will lead to significant inventory shortages.
- Lack of inventory will lead to increased costs for all parties involved—importers, wholesalers, retailers and consumers.
- China provides virtually 100% of consumer fireworks used in the U.S. market. Given the delays due to the Coronavirus and the preceding factory shutdowns, the industry is facing something it never has never faced before.
- Delayed shipments will be damaging because inventory must arrive at import/wholesaler warehouses 6-8 weeks before the July 4th holiday, so it can be distributed across the country in time for retailers to set up their stores and begin their advertising. With so much inventory needed for this season arriving so late, there will be significant hurdles on small business retailers to survive this season.
Economic ramifications for the fireworks season:
- The U.S. fireworks industry is facing an unprecedented economic challenge. Data from the 2018 season shows a combined industry revenue of $1.3B split between professional ($360MM) and consumer ($945MM). Consumer fireworks almost topping $1Billion alone.
- These industry segments grew an average of 2.0% and 7.0% over 2016-2018, respectively. Using those growth rates, as estimates, we can project that revenues this year would be at least $1.33B split between professional ($367MM) and consumer ($1,011MM).
- However, this year the growth is projected to be higher. July 4th is on a Saturday – typically the best July 4th day for the industry. Assuming average growth rates from prior Saturday, July 4th years, we estimate the revenues for the industry under normal conditions would total $1.41B, divided between professional ($380MM) and consumer ($1,031MM).
- Projections indicate an impact on this year’s celebration, from the Coronavirus outbreak, in the neighborhood of a loss in profits of 30-40%. In the case of the respective industry segments, we are using the middle point of 35%.
- Based on our information, the projected losses for this season are:
Professional fireworks – Lost revenue: $133MM, lost profits: $47MM.
Consumer fireworks – Lost revenue: $361MM, lost profits $253MM.
These losses may not appear large compared to other industries, but it is very significant to an industry made up of a few large companies and thousands of very small “mom and pop” operations. As a result, many of these owners will be driven out of business.
We face losing, for lack of a better way to put it, an entire year. There is no second season for the majority of the consumer fireworks industry. With this issue affecting the July 4th season disproportionately, the largest portion of a fireworks company’s revenues, the losses could be even greater.
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