As retail sales figures begin to come in from countries where lockdowns have been in force, the true impact of the coronavirus pandemic on the industry is becoming alarmingly clear. The result will almost certainly lead to the collapse of retail chains who might have been struggling before the pandemic arrived, with at least five chains entering some form of administration in the UK already and JCPenney among the household names on the brink in North America. While there was initial optimi
This article is for the Professionals
Only $4 USD for the first month
Already a professional? Log inoptimism that online purchases may have partially mitigated serious declines in brick-and-mortar sales, that did not eventuate and even while food-and-grocery sales have increased in some countries, apparel and other non-essential categories have been decimated.
In the US, retail sales in March declined by the highest month-on-month rate since record-taking began in 1992, down 8.7 per cent as about 90 per cent of the US population was subject to varying degrees of “stay-at-home” or “shelter-in-place” orders. Year-on-year sales – the more accurate measure of true retail sales performance – fell by 6.2 per cent.
Given the most populous US states to introduce lockdown measures only took action mid month, the figure suggests a calamitous fall in April.
The worst-affected categories were vehicle sales, down 25.6 per cent and service stations, down 17.2 per cent, impacted by the falling price of petrol, and fewer vehicles on roads.
Restaurants and bars – largely forced to discontinue serving diners in house and switch to takeaway and delivery – saw revenue fall 26.5 per cent
More indicative of the parlous state of US retail right now was a 50.5-per-cent decline in apparel sales, a 26.8-per-cent fall in furniture store receipts and a 23.3-per-cent decline in sports goods, hobbies and bookstores, according to Commerce Department figures. Sales of electronics and appliances fell by 15.1 per cent.
While grocery stores improved sales by 26.9 per cent and healthcare outlets by 4.3 per cent, sales by online retailers such as Amazon rose by 3.1 per cent.
According to Reuters, economists are projecting that US consumer spending, of which retail is just a part, will shrink at an annualised rate of 17 per cent in the first quarter of this year, which would be the worst figure since records began back in 1947.
Several retailers in the US have been identified as under threat as the pandemic kept shoppers at home during the first quarter, among them JC Penney, which is currently in talks with creditors to avoid a Chapter 11 bankruptcy filing.
Coresight Research says the coronavirus has forced the closure of an estimated 630,000 stores across the US and industry consultancy Jan Rogers Kniffen has predicted about 30 nationally known US retailers could file for bankruptcy protection this year. J Crew, Neiman Marcus, Ascena and Mattress Firm have all been reported as struggling to pay interest or meet rent commitments.
Neil Saunders, MD of GlobalData Retail, says while March’s US retail sales figures were ugly, they are but a prelude to a “hideous” April.
“The most worrying part is that not all of March was affected by the coronavirus. The first state stay-at-home order only came into place on March 19 and for the early part of the month most consumers were behaving normally. On top of that, the latter part of March saw a boost in spending on groceries, health products and home improvement – all things that helped support retail sales.”
Saunders points out there will be no such benefits this month.
“The whole month looks like it will be a write-off for retail, with stores remaining closed for the duration. Panic buying has now largely subsided and will not lift sales to the same degree. However, the biggest downsides are the dramatic rise in unemployment and the rapid decline in consumer confidence. Taken together, these dynamics will reduce the money people have to spend and how willing they are to spend it.”
Lockdown losses in Britain
In Great Britain, the first two weeks of lockdown were estimated to have resulted in a 27-per-cent slump in retail sales, according to data collected by the British Retail Consortium from its members.
Britons have been largely banned from shopping in any retail store other than supermarkets and pharmacies since March 23 and the BRC’s figures account for 14 days of trading prior to April 4.
The British economy is expected to decline by 35 per cent in the June quarter, according to the Office for Budget Responsibility, and even if the country’s annual output recovered post lockdown, a 13-per-cent economic annual decline would be the largest in more than 300 years.
The coronavirus crisis has already spelt the death knell for retail groups which were already struggling before it arrived, including department-store Debenhams and apparel chains Warehouse, Oasis, Cath Kidston and Laura Ashley.
The only positive note in the data was online sales of goods other than food, which surged 18.8 per cent in March.
“The headline figure masked even more dramatic swings: food and essentials faced an unprecedented surge in demand in the early part of March, only to drop significantly into negative growth after the lockdown and introduction of social distancing in stores,” said BRC CEO Helen Dickinson.
“The closure of non-essential shops led to deserted high streets and high double-digit declines in sales which even a rise in online shopping could not compensate for,” she continued.
“Sales of computers and accessories, board games, and fitness equipment all rose sharply as a result of the move to home-schooling and work-from-home. In contrast, demand for the latest fashion ranges significantly declined.
“The crisis continues; the retail industry is at the epicentre and the tremors will be felt for a long while yet. Many physical non-food retailers have been forced to shut down entirely or to limit themselves to online only to protect customers and staff. Consequently, hundreds of thousands of jobs are at risk within these companies and their supply chains,” said Dickinson.
Retail Gazette has reported that footfall in brick-and-mortar retail destinations across the UK slumped 83.1 per cent during Easter compared with the same holiday period last year.
French sales sink
In France, retail sales plunged 24 per cent month-on-month in March due to the nationwide lockdown.
Figures from the country’s central bank show March quarter retail sales down by 7.2 per cent compared with the preceding quarter. Department-store sales were down 19.3 per cent, small retail outlets dropped 9.6 per cent while supermarkets rose by 7.4 per cent due to panic buying ahead of the lockdown.
Asia following
As Inside Retail Asia reported earlier this week, the six-week long coronavirus lockdown in Malaysia is expected to result in a 60.7-per-cent decline in retail sales this month while non-essential stores were forced to close.
Retail Group Malaysia, which calculates data on behalf of the Malaysia Retailers Association, estimates that retail sales for the full year will drop by 5.5 per cent, should the government’s Movement Control Order be lifted at the end of this month. It has already been extended from March 18 until April 28.
Figures for March retail sales in Hong Kong and Singapore aren’t due to be released for another fortnight or so, but the experiences of other global markets are certainly an indication of what to expect. February Hong Kong retail sales fell by 44 per cent and Singapore’s by 10 per cent (excluding motor vehicles). Indonesian retail sales fell by a more modest 0.8 per cent, but the first case of Covid-19 officially reported there was in March.
