Thanksgiving and Christmas, who wins and who loses in the consumer sector
Between Thanksgiving and Christmas, the holiday season has arrived. But with Covid, should we expect a “Nightmare before Christmas” for the consumer sectors? The outlook of BNY Mellon Investment Management
“In this period before Thanksgiving and Christmas we are witnessing a constant evolution in consumption, which is moving away from experiences – travel, entertainment, bars, restaurants – to redirect towards e-commerce. This is one of the reasons retail sales, in markets like the US, have been so strong in the past few months. The phenomenon will be particularly evident at Christmas, with less entertainment outside the home, fewer meetings with friends, fewer guests invited for dinner, and certainly far fewer trips to meet family during the holiday season. All of this "saved" money will be partly destined for retail and luxury goods purchases.
HOW RETAIL SALES WILL GO
Morgan Stanley quantified the lower spending on entertainment and experiences at around $ 40-60 billion a month, of which a third could be captured by e-commerce. We think this explains the reason for the good performance of retail sales, despite the high unemployment scenario.
THE PERSPECTIVES FOR PHYSICAL SHOPS
Physical stores, on the other hand, will continue to record weak data. In October, weekly sales volumes decreased by 40% in the US, compared to the same period in 2019. Some companies that typically use physical channels, such as L'Oreal, have been able to quickly readjust to the new online paradigm and this is This is evident from the latest financial results, which show robust turnover for the current year and positive year-on-year growth, driven by e-commerce.
The luxury sector has also adapted quickly, with better results than initially expected.
E-COMMERCE
The bottom line for investors is that we need to focus on e-commerce players and brands that have a strong presence in online sales, or at least can rely on a solid web distribution network.
With the sharp rise in online shopping from the start of the pandemic to today, an interesting area to consider is that of REITs that specialize in warehousing and storage. Companies like Amazon, Fedex and other large retailers are busy increasing their reach, so demand for warehouses and industrial spaces continues to grow and prices per square meter, in markets like the US, are rising as demand exceeds current offer available. In an environment of near-zero interest rates, this is an attractive area for generating good income and potential capital growth.
Looking at the individual titles, some of the Covid beneficiaries over the Christmas period will be Amazon and all ecommerce platforms, Athleasure brands like Lululemon, Nike and Adidas, food and package delivery companies like Just Eat, and the food retail sector. Instead, formal or office wear brands such as Hugo Boss and Ralph Lauren, and all companies in the entertainment and travel sectors – cinema chains, pubs, restaurants, airlines, will suffer.
WHAT CHANGES FOR FOOD & BEVERAGE
For the food & beverage industry, in general, we believe that there will be a change in the destination of expenses, i.e. that consumers will buy directly from food distribution chains, which will benefit, rather than go to bars and restaurants, which will suffer vice versa.
A NIGHTMARE FOR RESTAURANTS AND BARS?
In summary we see no evidence, so far, that overall sales are collapsing or that this will be a disappointing Christmas for the purchase of goods and products, while on the front of restaurants and bars we could easily speak of a 'Nightmare before Christmas' " .
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/thanksgiving-natale-consumi/ on Sat, 28 Nov 2020 06:26:52 +0000.