I’ve demoted a few businesses that are public facing - Greggs and Next for example. Their historical performance has been great, but from visiting local supermarkets and a B&Q recently I think there is going to be a lot of work put into reopening these sorts of business. There’s going to be a need for managing the public and some PPE consumption that wouldn’t have been considered until the virus turned up, which will add cost into the business and eat away at margins. Earlier in the year Next projected a pessimistic forecast of losing 25% of sales, and in a more recent update had to revise that to 40%, which doesn’t bode well for the wider discretionary retail sector.
A recession and large numbers of people with reduced income is likely to hit big ticket spend, such as cars and the housing market. So Autotrader and Rightmove also got bumped down the list despite being dominant in their respective sectors.
REITS and property firms holding either retail or commercial/ office space also moved down depending on the tenants. I suspect we may see a downsizing of office space going forward, and many retailers were already struggling with high fixed costs from property before the virus.
I’m cautious about the time it might take some of these businesses and their underlying markets to adapt, and the amount of cash that is going to get burnt doing so.