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New lockdown could reveal whether retailers’ recent focus on e-commerce is effective


The new lockdown could be a testing ground for retailers who have been boosting their online capabilities since the COVID-19 outbreak.

When it became apparent that the pandemic has accelerated the shift to online shopping, most companies focused investment on their warehousing and distribution capabilities to pin growth on e-commerce.

This second lockdown could indeed turn into a baptism of fire for these new strategies, since non-essential items can be exclusively sold online.

It could be the case with Joules Group PLC (LON:JOUL), which expects to meet higher anticipated online demand over the upcoming peak trading periods, having boosted its UK warehouse capacity during the year.

In fact e-commerce, which jumped by over a third in the past five months, now accounts for 70% of total sales.

The British countryside fashion designer has also grown its customer base, which now counts 1.5mln ‘Friends of Joules’, through investment in digital marketing.

Nonetheless, investors are likely to keep calm after retailers did not express huge concerns regarding the closures imposed by the lockdown starting on Thursday.

They know the drill: furlough store-based staff, focus on online sales, boost digital strategy to engage with homebound customers.

Meanwhile, analysts think the government’s furlough scheme and tight cost control could help protect cash position and profits for several players.

The hope is that the key Christmas period will help recover some of the lost sales from the month-long lockdown, especially if the lockdown isn’t extended after December 2.

Earlier this week, Associated British Foods PLC‘s (LON:ABF) chief executive George Weston called for store opening hours to be extended once the lockdown is over.

He said that longer opening times, even up to 24 hours per day in certain locations, would be a welcome boost for retailers who will have to meet strong Christmas demand.

Elsewhere, Superdry PLC (LON:SDRY) has made it clear it is all about Black Friday, which falls on November 27, although it means margins will remain under pressure as the heavy sales seen during the summer will have to be repeated.

Even Dunelm Group plc (LON:DNLM), which was taken aback by the new measures, remains confident in its proposition amid strong consumer appetite for home products.

The linen specialist will only keep its stores in England active for click and collect services, because the homewares category is not on the list of permitted businesses unlike the previous lockdown.

The FTSE 250 firm said the current guidance is both “unexpected and inconsistent” with what happened earlier this year, so its outlook is now more uncertain.

Similarly, DFS Furniture PLC (LON:DFS) is not estimating a material impact as its manufacturing and deliveries are continuing despite the new measures.

Analysts at house broker Peel Hunt noted November is not a massive month for order intake and the large order bank and the ability to keep working through the lockdown ahead of Christmas was helpful.

Conversely, PLC (LON:WRKS) forecast a material adverse effect on sales as a result of the closures, though it reckons recent sales have been brought forward as customers have acted in anticipation of further restrictions.

Perhaps unsurprisingly, board games, jigsaws, art and craft materials and books for both children and adults have all been in high demand.

QUIZ PLC (LON:QUIZ) may emerge as another loser of the current lockdown, after it admitted it continues to extend its casual ranges to meet changing consumer behaviour, but increased sales in this area are not making up for losses in occasionwear revenues.

The retailer has been struggling during the pandemic because its offering traditionally caters to big events such as weddings.

Finally, for the pure play online retailers such as boohoo Group PLC (LON:BOO) and ASOS PLC (LON:ASC), the ‘business as usual’ may turn into higher sales as seen in the first lockdown.

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