England Re-Enters Lockdown: Implications for Retail

We can expect to see very substantial year-over-year sales declines across the store-based nonfood retail sector in November 2020. Following the UK’s announcement, Primark stated that lockdowns across a number of its European markets—accounting for 57% of its total selling space—will result in an estimated £375 million (around $485 million) of lost sales; Primark does not sell online.

During the two full months of the first lockdown (April and May), total UK retail sales declined by an average 14%, year over year, according to Office for National Statistics data. However, demand for Christmas gifts and other holiday-related purchases may prove more resilient than the purchases shoppers make primarily for themselves—and so total declines during the second lockdown could be less negative than those during the first lockdown.

We expect to see shoppers and retailers make widespread use of the exemption for click-and-collect services in nonessential retail to capture holiday spending. Major names in nonfood retail such as Next and Currys PC World have announced plans to continue offering pick-up services from stores. Post lockdown, December is likely to see a strong bounce, as consumers scramble to get their holiday shopping back on track. However, the three-week period between the planned end of lockdown and Christmas Day is much too short to fully recoup sales lost in November. George Weston, CEO of Primark’s parent company Associated British Foods, and Steve Rowe, CEO of Marks & Spencer, have called for a post-lockdown relaxation of the UK’s strict Sunday-trading restrictions to help retailers recover sales.

A November lockdown will be the last straw for some retailers, who had been banking on peak holiday demand to help offset losses from the extended first lockdown of nonessential retail from March to June. We expect to see a renewed wave of retail administrations (bankruptcies) and company voluntary arrangements, which are used to reduce liabilities including shuttering stores and renegotiating rents. UK store closures, already running at 2,207 year to date versus 771 in the whole of 2019 according to Coresight Research data, are likely to accelerate.

We are already seeing major negative impacts in UK retail as a result of the coronavirus crisis. In the past week, the John Lewis Partnership has announced the axing of 1,500 head-office jobs. Sainsbury’s has announced plans to cut 3,500 jobs and close 420 stores in its Argos chain (equivalent to around 80% of the Argos estate); this follows Argos reporting solidly positive sales growth during the first lockdown, despite the enforced closure of its standalone stores.

Any extension of the lockdown beyond December 2 would be a disaster for UK retail, effectively writing off the holiday season and, so, amplifying the negative news flow around store closures, job losses and bankruptcies.

Read more in our report Holiday 2020: UK Retail Outlook Update—November Lockdown To Slam Retail.