Market Musings 13/11/21: The Revenge of Bricks and Mortar

13th Nov '21 by Edmund Shing

8 comments 2026 reads

Market Musings 13/11/21: The Revenge of Bricks and Mortar

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A Pause in Online Shopping Momentum?

One of the success stories of the COVID-19 pandemic and associated lockdowns has of course been the incredible growth of online retail, supercharging an already impressive structural shift in shopping habits away from bricks and mortar and towards the internet.

With the advent of 5G superfast mobile internet on the near-term horizon, understandably it is not hard to find good reasons to underpin this online retail growth going forwards.

Global e-commerce sales growth forecast to continue, after 2020’s massive leap

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Source: Statista. Note 2021-2024 are forecasts

We are all addicted to a greater or lesser extent to online shopping, as underlined by the statistics shown below, with almost all UK consumers visiting an online shopping portal in the last month.

Online shopping is now an addictive habit in the UK

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Source: Statista, as of May 2021

But remember, the lockdowns delivered something like 5 years-worth of growth in online retail in just a few months, according to McKinsey and retail consultants. So all of these “lockdown habits” such as online shopping, video games and video streaming services received a similar one-off boost to demand in mid- to late-2020, some of which is now perhaps unwinding in the short-term as re-opening takes hold. Consumers are now returning to bricks and mortar shops and hospitality venues like pubs, restaurants and sporting venues, with UK retail footfall levels only around 16% below 2019’s seasonal levels.

UK retail footfall continues to recover closer to pre-pandemic levels

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Source: Springboard, data smoothed as 7-day average

This reopening effect is evident in the cooling of online retailers’ share prices since mid-year, with Asos, Boohoo and Zalando all falling back of late. This is in line with their earnings forecasts, which have all fallen in the last few months as cooling growth rates in sales and profits have led to downwards adjustments. From its peak in mid-2020, Boohoo has since suffered a 52% drop in share price, while Asos has taken a 54% hit since peaking at the end of 2019. Even German online…

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WarrantStar

13th Nov '21

Another very interesting piece! Thank you.

Zipmanpeter

For me, The big change was the increased use of digital by the over 50s. They have the money to spend. No one has yet created a really good 3rd age specific brand/platform. JDWilliams (NBrown) promised but did not deliver, perhaps Saga (or Hotter Shoes ref SCVR!) or someone will emerge.

Rusty2

Sales growth has fallen back for Boohoo (LON:BOO) and Asos (LON:ASC) but Shein sales seem to be increasing considerably, they are now one of the biggest online retailers in the US. Shein are far larger than Boo and Asc and growing rapidly. Alibaba have also entered the clothing online market, they are much larger than Shein.

I don’t think you can just go by Boohoo (LON:BOO) and Asos (LON:ASC) figures to judge online sales.

But I do agree that shops are getting busier, B&m European Value Retail Sa (LON:BME) was the busiest I have seen since COVID started. Good as long as they have enough stock to sell. Halfords have reported supply issues with bicycles.

PayPal produced disappointing figures this week, shares went down about 10%.

Pubs are having issues with sales and staff shortages, seems older drinkers are not returning to pre COVID numbers, J D Wetherspoon (LON:JDW) ale sales were down 30% but cocktails sales were up.

How much will transport be affected by HGV driver shortages and wage increases, many work on tight margins.

timarr

PayPal produced disappointing figures this week, shares went down about 10%

They didn't (produce disappointing results) but the shares did go down.

The issue was not Q3 results but the expectations for '22. The company predicts that revenue will "only" rise by 18% due to supply constraints and general economic conditions. Frankly if a revenue rise of 18% - most of which drops straight through into FCF - can provoke a fall of 10% in the share price it does rather suggest the company was overvalued to start with (it was, I hold).

As for the future of retailing - whether clicks or bricks - that's probably more dependent on the general economy than anything else. It still looks like a horribly competitive space with little in the way of real moats other than for a superlative operator like Next (LON:NXT) - or possibly Dunelm (LON:DNLM).

timarr

Momoko Miyamoto

Also take a look at Urban Logistics Reit (LON:SHED) (I hold) now on a premiuim to NAV but at a discount to larger players like Tritax Big Box Reit (LON:BBOX) . Urban Logistics Reit (LON:SHED) is about to move from AIM to the LSE main market having sufficiently grown its market cap so this discount may narrow.

Well revenue was slightly below target and they have reduced forecasts for 4Q and next year. Some is due to lower eBay payments, down 46%.

Brilliant Leader

14th Nov '21

Another thought provoking piece Edmund.

A couple of other REITS that are increasing exposure to retail parks are Aew Uk Reit (LON:AEWU) and Ediston Property Investment (LON:EPIC) (I hold both). Both take an active approach to managing their estates and have seen recent rises in NAV and both pay healthy dividends. As ever, DYOR

Cheers
Simon

Harry Hindsight

15th Nov '21

Quite like Marks And Spencer (LON:MKS) online shopping being of the older persuasion - far more choice than visiting stores. Have third party brands and food support arm. They may have been turning the corner before covid and are now back to their end 2019 level. Have the three payments free credit system.

Market Musings 13/11/21: The Revenge of Bricks and Mortar

Market Musings 13/11/21: The Revenge of Bricks and Mortar

A Pause in Online Shopping Momentum?

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Edmund Shing

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