We all knew it would be coming eventually. At least, we hoped it would. An end to lockdown, in stages, means that in the next few weeks, non-essential shops will be opening once again. Though coronavirus fears and social distancing measurers are still likely to be a major impact for some time yet, what exactly does the future hold for UK retail shares?
Litmus test Luckily we may have recently seen a litmus test, so to speak. Due to the disparity between countries with removing lockdown, a number of European arms of UK retails have recently reopened. Primark, for example, owned by Associated British Foods (LON:ABF), recently opened its five stores in Austria, followed shortly by 20 shops in the Netherlands.
Though the company has yet to release exact sales figures, ABF said that while overall footfall in the shops was down and spread more evenly through the week, basket sizes were “notably larger”. ABF was doing relatively well before lockdown.
It is perhaps not surprising that people are still wary of shopping in stores. Primark has no online arm, which makes it a sample of a bricks-and-mortar retailer for us to consider. It seems set to do ok, but perhaps not great.
Similarly, Superdry, which was already seeing some issues, has also been able to reopen more than 60 of its stores in Europe. Though it is still early days, the company has said trading has exceeded its internal expectations. CEO Julian Dunkerton said “We’ve moved from being about 70% down to around minus 30%”.
These levels are in line with those seen in Asia, where due to the early onset of the virus, reduced lockdown measurers have also come in early. Department store sales in China were down 35% in March, while those in South Korea were down 40%.
UK retail apples for European oranges Of course there are a number of factors that would suggest the numbers can not be directly translated. Most notably the varying restriction and social distancing measurers put in place in each country. As well as local laws, these will be dependent on things like floor space and layout.
The prevalence of online shopping, as well as regional attitudes and fears of Covid-19 are also harder to judge. It seems likely that those areas and people that have undertaken rules more strictly are also more likely to return slower to normal life.
Londoners, for example, have been notable in the adherence to the rules (as well as having the highest levels of Covid-19). It may be a while before Oxford Street fills up again.
On top of these concerns, UK retail will have to deal with increased costs associated with social distancing, changes to staff and an as yet unknown social shift. It is not unreasonable, for example, to suggest that having your hand forced into online shopping will mean you now know the convenience of it going forward.
The post How will UK retail shares look after lockdown? appeared first on The Motley Fool UK.
Karl has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020
First published on The Motley Fool
