The coronavirus crisis has had a devastating effect on share prices of UK-listed retailers, down by almost a third on average over the last month, with the smaller firms suffering the most as investors worry that the virus could push weaker retailers under.
Already the impact of coronavirus has seen Moss Bros agree on an acquisition by the owners of Crew Clothing for just £22.6m, and though this was a 61% premium on its share price before the announcement, it only brought it back to pre-coronavirus levels.
When the coronavirus crisis began investors were mainly focused on retailers with high exposure to China, either in terms of sales or supply, but as the virus has spread, concerns have moved to the threat of recession and, in the shorter term, the impact on demand of self-isolation and a possible shutdown of non-food stores, as has occurred in Italy.
While the possibility of isolation and shop closures does point to a greater negative impact for physical retailers, there had been little difference in the impact between the share prices of pureplay online and multichannel retailers, up until last Thursday (11th March). Since then there has been a major shift in investor sentiment.
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In terms of sectors, there is a clear difference between the investment sentiment in food retailers and the rest, with food retailers down on average 10.9% compared to 35.5% for the rest. Food is, of course, essential, and there are some aspects of the crisis that will drive sales such as people favouring eating in rather than going out to restaurants. But panic buying of ambient goods is really only a short term sales gain that will level out as shoppers destock, and ensuring that supplies are maintained will bring additional costs.
Retailers concentrating on non-essential purchases have been hit harder, with the hardest hit being stationery, books and card sellers which were down 53.3%. It should be noted though this includes the impact of WHSmith’s profit warning on 12 March, which was driven by its high exposure to the travel sector.
While mid-market retail has had a torrid few years as shoppers have traded down to value players, their share prices have, on average, not been hit as hard. Premium retailers, with exposure to demand from China and Korea, have fared even worse on the stock market, as have value players, who rely on suppliers in China to a greater degree than the mid-market.
*Data taken from share prices of 45 UK listed retailers on close of 12 February and close of 12 March 2020. All results are weighted by market capitalisation.