logo-loader
viewNext PLC

The big challenge ahead for shops and pubs as coronavirus restrictions ease

If non-essential businesses are allowed to open over the next months, they will have to adopt measures to make customers feel safe

Next PLC - Re-opened businesses will have to figure out how to attract customers, among other challenges

Consumer-facing businesses are facing the challenge of luring consumers back in when restrictions are potentially eased next month.

According to an official 60-page document published on Monday, it appears that some establishments could reopen as early as 1 June, though the hospitality sector is not likely to restart before July.

READ: US re-openings to give steer on how post-lockdown restaurant sector will look says Barclays

So far, the government has not mentioned what kind of businesses will be first and what safety measures will be imposed.

“There is not enough detail for us to understand what is ahead,” Patrick O'Brien, UK retail research director at GlobalData, told Proactive.

However, companies need to start developing a strategy to attract consumers.

“Even when restrictions are lifted, it is not going to be business as usual for retailers at all,” O’Brien told Proactive. “They will need to take measures to make the shoppers feel the desire to come and likewise employees need to feel it is safe to work.”

Fashion designers are going to have a harder time compared to other retailers, as they will have to figure out how customers can touch or try on garments.

“Not only they will have to make shoppers feel safe, but also happy enough to make that purchase. That is an extraordinarily difficult balancing act,” O’Brien concluded.

Next PLC (LON:NXT) already told investors it will open out of town stores first, noting that larger spaces allow social distancing.

According to Hargreaves Lansdown analyst Sophie Lund-Yates, other shops may follow suit, though it is still early to understand how the industry could move.

And while Next is better placed than others to navigate the crisis thanks to its online offering, it is not clear what other names will emerge with fewer bruises.

READ: M&S double upgraded and Next downgraded as Credit Suisse rebalances views on UK retail

Another hard-hit segment will be the hospitality sector, with eateries to take more battering, Peel Hunt reckons.

Restaurants and food-led pubs are expected to make losses at a faster pace when reducing capacity when compared to wet-led pubs.

Analysts pointed out that consumers will focus on quality rather than quality, leading to a further polarisation in demand.

Revolution Bars Group PLC (LON:RBG), Mitchells & Butlers PLC (LON:MAB) and JD Wetherspoon PLC (LON:JDW) are expected to rack up debt, although it is forecast to dwindle down by 2022.

Other players estimated to emerge on the other side will be Restaurant Group PLC (LON:RTN), Domino's Pizza Group PLC (LON:DOM) as well as Peel Hunt’s house stock Loungers PLC (LON:LGRS).

Some venues with outdoor space could open at the beginning of July if coronavirus infections are kept under control, but a second wave is always round the corner without a vaccine.

In that case the government would swiftly impose restrictions, Boris Johnson said on Sunday.

READ: Pubs 'in precarious position' but JPMorgan upgrades Mitchells & Butlers

Another risk comes from restoring consumer confidence.

Footfall in UK high streets, retail parks and shopping centres plunged by over 80% in April when only essential shops were trading, but it is not going to jump back to normal levels anytime soon.

People may feel stressed about going to public places or straining their budgets too much, considering the weak job market.

“Depending on how bad the economy is hurt, a lot of [the recovery] will depend on how much discretionary spending the public will want to partake and how well-off the consumer base is feeling,” said Lund-Yates.

In Berenberg’s worst case scenario, households could keep precautionary saving to the extent that the recession continues even when the lockdown is eased.

Kallum Pickering, economist at the German investment bank, the UK could return to recession in 2021 in case of a disorderly Brexit.

With trade talks expected to start this week, a lack of comprehensive trade agreement with the EU remains a significant threat following the pandemic.

Quick facts: Next PLC

Price: 4800 GBX

LSE:NXT
Market: LSE
Market Cap: £6.38 billion
Follow

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

DomaCom's Arthur Naoumidis discusses acquisition of first Rent-to-Own property

DomaCom Ltd's (ASX:DCL) Arthur Naoumidis caught up with Proactive's Andrew Scott following the news it's acquired the first property for its new, innovative Rent-to-Own product in the Melbourne suburb of Moonee Ponds. The one-bedroom apartment in the Mason Square development was acquired for...

21 hours, 30 minutes ago

4 min read