The shining star of retail today - The supermarket sector

Posted by Datscha on 1st April 2020 -

 

Just when retailers thought that things couldn’t get any worse, along comes the Coronavirus. Restrictions imposed by the UK government has forced most retailers to shut down their physical stores in what is already one of the most challenging times for the sector, prior to the outbreak. Those that have an online presence can continue trading, however, with millions of people struggling financially having suddenly lost their jobs, discretionary spend is the last thing on their minds.

 

There is rightly a lot of doom and gloom across the globe because of the current situation, however, there is also some positive news. One of the star performers during this difficult period is the supermarket sector. The big 4 operators (Tesco, Sainsbury’s, Morrisons and Asda) have been under pressure in the last few years as shoppers deserted them to shop in Aldi and Lidl or ate out more often reducing the need to buy food in. Online shopping also eroded their market share as shoppers, who used to buy their non-food products from these large hypermarkets, opted to purchase these goods from online operators such as Amazon. This resulted in lots of underutilised space in the larger hypermarkets and also resulted in a reduction in the number of new supermarkets they opened. Today they are under immense pressure for a very different reason – they are struggling in to keep providing essential grocery and household products to the nation, which has seen a huge surge in demand in recent weeks. Demand has been so high that these stores have had to introduce measures such as reducing opening hours or restricting the number of shoppers into stores in order to try and fill the shelves with essential goods.

The major chains (Tesco, Sainsbury’s, Asda, Morrisons, Waitrose, Aldi and Lidl) operate from approximately 6,000 locations across the UK.  These operators provide excellent covenant strength for landlords and within the last 12 months, investors have purchased supermarkets for a total of over £1.2bn, according to the latest data in the Datscha transaction module.  Property owners with supermarkets as tenants are less likely to receive requests from them for reduced rent payments at a time where most other operators in the retail sector have seen sales decimated. This period of panic buying is creating more demand than the busy festive season so will ultimately boost sales for those in the grocery sector.

Within Datscha, during the month of February, we have seen footfall outside some of the major supermarkets increase by over 10% year on year and we expect this number to increase significantly for the month of March due to the high demand for products.

Opinions vary on how long this current situation will last, and the effects will last for a significant period afterwards, however, supermarkets look to be one of the winners during this crisis.

By Lesley Males

March 27, 2020