Two years after the UK was plunged into its first national lockdown, Retail Week analyses how the Covid crisis has impacted the valuations of Britain’s listed retailers.
Global stock markets have been on something of a rollercoaster ride for the past two years amid the ups and downs of the coronavirus crisis.
Share prices were pummelled in early 2020 as Covid-19 began to spread outside China and was officially confirmed as a global pandemic by the World Health Organization (WHO) in March.
Spooked investors started to sell up, sending valuations into a nosedive. By the time prime minister Boris Johnson enforced the UK’s first national lockdown on March 23, 2020, the share prices of many retailers listed in London had already been battered.
But as the health emergency spread through the UK and across the world, shopper habits – and the attractiveness of certain businesses – changed dramatically.
As spend shifted online at a rapid pace, the share prices of ecommerce players including Asos, Boohoo, Ocado and AO spiked.
Home and DIY specialists such as Kingfisher benefited from consumers sprucing up their properties and kitting out home offices, while the likes of Pets at Home also cashed in on a jump in pet ownership.
But on the two-year anniversary of that first national lockdown, the initial impact of the pandemic has settled. Ecommerce penetration has slipped from its pandemic peak, consumers have returned to stores and offices on a more regular basis and share prices are showing signs of adjusting to retail’s ‘new normal’.
Research by Retail Week Prospect reveals the businesses that have emerged as the winners and losers over that two-year period from a share-price perspective.
Bricks-and-mortar retailers dominate the top three, with Halfords, Frasers Group and B&M all growing their valuations by more than 75% between March 2, 2020, and March 18, 2022.
Naked Wines, Eve and Sosandar emerged as the best-performing pureplays, coming in at fourth, fifth and sixth respectively in the ranking.
Kingfisher, Pets at Home, Sainsbury’s, Greggs, Next and Marks & Spencer were among the other physical retailers to register a growing share price during the two-year period analysed by Retail Week Prospect.
Only five pureplays made the top 20 – the boost their market caps received during the peak of the pandemic normalised as shops reopened and ecommerce penetration dipped back towards pre-Covid levels.
Starkly, all eight of the retail businesses that listed in London during the pandemic have had their values annihilated since floating.
Wickes, which demerged from Travis Perkins last April, was the best performer of that group but still lost a third of its value between the date of its IPO – April 28, 2021 – and March 18 this year.
The Hut Group – which has also been plagued by question marks over its corporate governance – has shed an eye-watering 85% of its value, despite its September 2020 IPO getting off to a rip-roaring start, and was only kept off the bottom of the table by beleaguered McColl’s.
The convenience store operator’s share price had eroded dramatically to just 2p when markets closed on March 18, compared with 33.7p at the start of March 2020.
Brand evolution
Overall, of the 45 listed retail businesses analysed, 20 registered an uptick in their share price over the two-year period while the remaining 25 were in decline.
Retail Week research director Lisa Byfield-Green said: “Many of the businesses at the top of the table are those that have proven themselves agile throughout the pandemic, adapting their business models to serve shoppers in new ways, and this makes them attractive to investors.
“Halfords demonstrates the rewards for agile companies that invest and innovate for customers. It has transformed through investment in stores, garages and digital services, while at the same time cementing its position as a service-led business with more than 1,400 fixed and mobile services locations.
“The Avayler service-management software it has developed to manage its stores and garages is now generating B2B revenue as Halfords makes the software available to other companies. This is exactly the kind of ecosystem development and brand evolution that we are seeing from successful retailers.”
Shore Capital head of research Clive Black added: “The big movement and the massive fact to digest is how pureplay online has been an unmitigated disaster for investors, who may have bought into hype and shallow foundations around the fundamental economic impact of the pandemic upon retail.
“At the start of the pandemic, when the stars were seemingly aligned for the online channel, who would have thought that such equity destruction would ensue in the online retail world?”
Clive Black, Shore Capital
“Disastrous IPOs like THG, In The Style and Made especially stand out, with the Deliveroo and Moonpig digital car crashes not far behind them.
“Sustaining the dotcom pain are incumbent pureplay businesses that have not sustained initial strong performances in the pandemic to deliver notable [share-price] losses: Asos and Boohoo.
“At the start of the pandemic, when the stars were seemingly aligned for pureplay, the online channel, who would have thought that such equity destruction would ensue in the online retail world?
“The pandemic is showing that the optimal format composition for the future is multi in nature.
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