Bored into spending: How stay-at-homers might spark a recovery
Retailers have been hit hard by COVID-19, but people stuck at home may be bored into spending.
JB Hi-Fi's sales have soared during the lockdowns
Morgan’s Stockbroking believes underlying trading conditions for some retailers could be positive as consumers bring forward purchasing decisions and brace for further Government restrictions.
Less spending on offshore travel, entertainment and services and more time in our homes may stimulate demand for for takeawy food, white goods, tech, aftermarket automotive and household goods for a period, with a caveat that stores actually remain open for spending.
Overnight in New York, shares in Uber jumped 38 per cent as investors speculated that people forced to stay home will increase demand for its Uber Eats service.
Domino’s Pizza’s US outlets are hiring 10,000 people to deal with the spike caused by so many people now at home.
However, Wesfarmers announced this morning that discretionary sales at its Target stores were showing weakness while other outlets like Bunnings were remaining strong. It said it could not predict the impact on its revenue from the COVID-19 outbreak.
Brisbane based Corporate Travel Management also announced it had no current need to raise equity due to its strong liquidity position. It has targeted cost reductions of at least $10 million and has deferred its dividend.
“CTM is experiencing a significant impact to its business following the introduction of additional government-imposed restrictions on international travel and major reductions in domestic capacity,” it said.
“Considering this, CTM has implemented further comprehensive cost reduction actions which, when combined with CTM’s strong liquidity position, will enable CTM to withstand an extended period of reduced activity.”
The Vita Group has also scrapped its dividends and said it expects a reduction in revenue for the rest of the year. It has scrapped its guidance.
Morgan’s said that aside from lower foot traffic in malls and shopping centres for hygiene purposes, the more concerning impact for retailers will be on confidence and sentiment.
It said it saw earnings risk “as being most elevated” for Mosaic Brands, Apollo Tourism, Lovisa Holdings, Accent Group, Michael Hill Jewellers and Super Retail.
Conversely, we see less downside earnings risk in Domino’s, Bapcor, JB Hi Fi and Baby Bunting,” it said.
“We recommend treading carefully with the consumer discretionary space given that it is at the pointy end of any economic fallout.”
