OT. Let the good times roll : - )...................
Death business hurting - people living too long!Friday, February 26, 1999 06:39 PM<Picture> Mail this article to a friend new!
By Steve James
NEW YORK, Feb 26 (Reuters) - To put it bluntly, not enough people are dying to satisfy investors.
That's the complaint from big corporate "death-care" companies who are suffering on Wall Street because modern science has given the average American a life-expectancy at least 10 years beyond the traditional three-score and ten.
"Declining death rates pose a challenge for the industry," was the delicate way William Heiligbrodt, president and chief operating officer of Service Corp. International (Nyse:SRV) put it last month. Service Corp. is the world's largest death-care organization, with some 3,000 funeral homes, 433 cemeteries and 191 crematoria in North America, Europe and Asia.
Two weeks ago, Heiligbrodt resigned as SCI's fourth-quarter profits plunged 36 percent and its stock fell to $15 from a year-high of over $47.
Shares in its big Canada-based rival Loewen Group Inc. (Nyse:LWN) also slipped more than 30 percent this month as its credit rating was cut and the company delayed announcing fourth quarter results. It is struggling with heavy debt from excessive expansion in the last few years, through which it compiled 1,000 funeral homes and 350 cemeteries.
"The lower number of deaths at the moment has definitely taken the bloom off owning stock in death industry companies," said Jack Springer, executive director of the Cremation Association of North America. "Investors have lost their fascination with the death-care industry.
"For the next 20 years the industry will stay flat," he said, predicting it will stagnate until the late 2020's when the post-war "baby-boom" generation starts dying off.
Time was, when the funeral business, which depends on customers dying to make money, was built on trust and local knowledge, with small firms catering with discretion to families at times of loss.
No longer, said Kelly Smith, spokesman for the National Funeral Directors Association. Nowadays, around 15 percent of the nearly 22,000 funeral homes in America are owned by publicly-owned companies like Service Corp., Loewen, Carriage Services Inc. (Nyse:CSV) and Stewart Enterprises (Nasdaq:STEI) .
"The business is very sound, but there's no question it is going through real changes," said Smith, whose association represents 15,000 funeral directors, many of whom are unhappy with the "corporatization" of the industry.
"We are doing all we can to prevent this from bubbling into a civil war in the industry," he told Reuters. "Imagine a town of 100,000 people with, say, six funeral homes who have all operated on the same playing field for years.
"Along comes a multimillion-dollar corporation, buys one and starts soliciting by telephone. You can imagine what it does and in some states there are major fights."
Smith acknowledged the industry had been forced to change to reflect society's change over the century to a more mobile, diverse culture. In addition to a new prominence of publicly-owned corporations, he cited more shopping around by consumers, changing prices, sales of "pre-need" funerals, shops selling caskets, and alternatives, such as cremation.
The Cremation Association's Springer predicts cremations in North America will rise from the current 23 percent to 40 percent in 2010, because it is simpler and in most cases cheaper at an average $1,800 than the $4,800 for a funeral before the lot and cemetery expenses.
"Big companies are greedy and self-centered, their interests are more important than the consumers and they try not to give information to the consumers," he said.
Darryl Roberts, a former funeral director and author of "Profits of Death" a book he said is about "greed in the death industry," said financial woes of the corporations can be traced to prices they pay for funeral homes and cemeteries.
"You might have a company valued at $700,000 and someone like SCI would come in and pay $1-1/2 million for the same property. You can't compete, there's a feeding frenzy and they are willing to pay any price to control the market."
Roberts explained it is part of a long-term strategy to take advantage of the expected baby boomer death boom.
"They all hope the death rate goes up as the baby-boomers die and they want to get a foot in the door now and control the market. They hope to position themselves to take advantage."
Quote for referenced ticker symbols: STEI, SRV, LWN, CSV© 1999, Reuters |
