Retailers Aren't Lazy About Their Survival During the Coronavirus Pandemic

The worldwide coronavirus pandemic has caused many retailers to close their physical stores, causing a sudden increase of excess inventory. Nike, for example, saw an inventory spike of 7 percent in its fiscal quarter ending Feb. 29. As a result of the current crisis, retailers are turning to different measures to keep their businesses afloat.

Almost half of the online merchandise for U.S. mall stores is on sale this week. Refinitiv discovered this information in a collaboration with StyleSage, a company that analyzes retailers, brands, online trends and products across the globe. The discount penetration (i.e., how much of the assortment is on sale) rose to 48 percent from 43 percent the previous week. The U.S. mall average percent discount is also up from a year ago. Whether this trend in the U.S. will spill over into other geographies and retailers remains to be seen.

Meanwhile, some retailers are trying to keep labor expenses under control as the coronavirus pandemic prompts a surge in layoffs and hiring freezes. To track these trends, Refinitiv partnered with LinkUp, a company that tracks global job listings across companies.

Shift to Stronger Digital Spending

Nike said during its earnings call that digital sales have accelerated even more since its stores have been closed, suggesting that the COVID-19 outbreak might be conditioning shoppers to default more to online vs. physical stores. As China was the first country to experience the COVID-19 outbreak, it has had more time in quarantine compared to other continents. Thus, Nike has now experienced the other side of the crisis in China after five weeks to six weeks of closed business. What it's seeing is a total transformation of digital consumption. As consumers return to stores and to engaging with products, the majority of customers are still going online to shop for products.

Accordingly, analysts polled by Refinitiv have been revising their revenue estimates upward for online retailer FarFetch, as it scores an 84 out of a possible 100 on the StarMine ARM score. FarFetch also ramped up its job postings and hiring efforts towards the end of March. A lot of these job types include roles that can be filled while “working from home.” The retailer might also be taking advantage of the fact that it’s a hirer’s market, and thus a good time to find tech talent as the online digital consumption trend grows.

Exhibit 1: FarFetch Unique Job Count vs. Refinitiv Revenue I/B/E/S Mean Estimate and SmartEstimate

Credit: LinkUp data, available on Battlefin Ensemble Platform

U.S. Mall Stores

Meanwhile, almost half of the online merchandise for U.S. mall stores is on sale this week. The discount penetration rose to 48 percent from 43 percent in the previous week. The U.S. mall average percent discount is also up from a year ago.

There’s more discounting also happening online for U.S. mall stores. These retailers have seen a 5 percent increase in both discount penetration and average discount from last week. This is also a year-over-year percent increase. This is troublesome as discount penetration and average discount are trending upwards for this sector consistently since the beginning of March, and thus can have a negative long-term effect on profits.

Exhibit 2: Average Online Discount Penetration and Average Percent Discount for U.S. Mall Stores

Credit: StyleSage Co.

To summarize, the coronavirus pandemic is definitely changing the world, consumers and the global economy. The unprecedented phenomenon is pressing companies, including retailers, to adjust by the second. The Refinitiv fundamental data, in collaboration with alternative data partners StyleSage and LinkUp, suggest that retailers aren't lazy about their survival. Whether retailers offer discounts to move excess inventory or lay off employees to reduce labor-related expenses, a prolonged pandemic will likely prove damaging for the financial health of businesses experiencing zero physical revenue.

Jharonne Martis is director of consumer research at Refinitiv, one of the world’s largest providers of financial markets data and infrastructure, serving over 40,000 institutions in approximately 190 countries.