For the last four decades, retailing has been a struggle between two ideas. Social retailing saw buying as entertainment. Asocial retailing saw it as a chore.
The result will be permanent shifts in how cities and suburbs are organized. Social retailers in big malls, already weakened by competition, lack the financial strength to continue fighting the trends of dual-income and time-limited shopping routines. Once the crisis is over, will the asocial retailers fill the gap?
The Investment Trend in Retail Stocks
In today’s extreme circumstances, hotel companies like Hilton Worldwide Holdings (NYSE:HLT), Marriott International (NYSE:MAR) and Host Hotels & Resorts (NYSE:HST) are shedding employees. So are dine-in chains like Darden Restaurants (NYSE:DRI), Brinker International (NYSE:EAT) and Cheesecake Factory (NASDAQ:CAKE).
As a result of the coronavirus, “Consumer spending will decrease, ” wrote Dr. Zachary Cohle, an assistant teaching professor of Economics at Quinnipiac University. “This was true before the lockdowns started due to the disruption of supply chains in East Asia. Groceries, pharmaceuticals, and essential product markets will see increases in sales; however, small business that require open doors to generate revenue will take losses.”
Some of what’s happening is short term. Companies like Domino’s Pizza (NYSE:DPZ), Papa John’s (NASDAQ:PZZA) and Chipotle Mexican Grill (NYSE:CMG), which are staffing up for take-out and delivery, are unlikely to remain the only dining choices forever.
Once the crisis is past, people will fly again, go to hotels, even take vacations. But in retailing itself, this could be the death of the malls. Companies like J. C. Penney (NYSE:JCP) and Dillard’s (NYSE:DDS), already weakened by the trend of the last generation, may not survive. This will put pressure on mall owners like Simon Property (NYSE:SPG) and National Retail Properties (NYSE:NNN).
Temporary or Permanent
There are also retailers who were fading on the general trend but are now deemed essential as people stay at home. Kroger stock is up on the year, after having been left in the dust.
There are also stocks being whipsawed in both directions by the coronavirus. Uber (NYSE:UBER) was being hammered as people stayed home, but is now getting a bid because of its Uber Eats delivery service.
Home improvement retailers like Home Depot (NYSE:HD) and Lowe’s Companies (NYSE:LOW) have been hammered as people hunkered down. But once folks can get out of the house, they may go on a home improvement binge, making today’s prices on these stocks look dirt cheap.
The Bottom Line
It’s hard to believe that, at one time, Macy’s and Walmart were direct competitors. Both sold clothes and general merchandise. Walmart was only a discounter until it went all-in on grocery with its “hypermarket” concept in the 1990s. It now has almost 25% of the grocery market. Target was birthed from a traditional mall retailer, the Dayton-Hudson chain.
Trends that ran over decades, however, have become sudden facts of life in this plague year. People are having to decide what they need and drop what they just want. This is creating what look like permanent shifts in the retailing landscape. It’s also creating some fads that will fade.
The fads may be a trade. The trend is called an investment.
Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. As of this writing he owned shares in CVS and AMZN.