Coronavirus & The Impact On Luxury Goods and Retail | The Corona Correction | Refinitiv
Roger Hirst: Welcome to the Corona Correction Series in association with Refinitiv. I'm your host, Roger Hirst. Consumer stocks, especially those with significant sales exposure to China, have come under sustained early pressure. Has the impact now started to spread globally, and are there sub-sectors that might be shielded from the worst of the effects? Earlier I spoke to Refinitiv's Consumer Specialist Jharonne Martis, to see how the sector is coping in its broadest sense. Jharonne Martis: To date, about 70 retailers have been discussing this during their earnings call, and are warning us not to expect too much from them. In fact, we've received a lot more negative than positive earnings and revenue pre-announcements already for the first quarter of 2020. And this may not be the end of it. Retailers like Capri who own Michael Kors, the luxury brand, and also Jimmy Choo and Versace have been slashing their earnings guidance because they had to close a significant amount of stores on the Chinese mainland. The luxury brands are going to be hit the hardest because how reliant they are on the Chinese and Asian consumer. So take, for example, Burberry. Over 40% of their revenue is generated in China, and they had about a third of their store closures there. So therefore, they're going to be hit very hard. But then if you look at the discounters, they are actually faring very well. Costco this past weekend had huge lines out the door of consumers that panicked and went to buy the basic necessities. And when you look at the inventory levels, that's the most concerning thing right now, shelves at retailers are still full, but in the upcoming quarters, if this continues over the next couple of months, we can start seeing some empty shelves here in the United States in late summer. Roger Hirst: Obviously, we shouldn't be surprised that luxury brands, those with the greatest exposure to China have looked the most vulnerable. But maybe if China has already passed the level of peak panic, then these stocks are already in their recovery phase. From the long side, some of the US stocks are quite well insulated. Indeed, some are even benefiting, as consumers begin to take cover. But what was also interesting was that fear could lead to stocks on shelves being rapidly depleted. That could be an initial surge in demand that is actually a prelude to people hunkering down at home, in which demand could then drop dramatically. We'll see you tomorrow with another update.