Europe’s Retailers Grapple With Biggest Disruption in Decades

(Bloomberg) --

Simon Wolfson, chief executive officer of clothing chain Next Plc, said this week that the coronavirus pandemic presents the global retail industry with its biggest threat in nearly half a century.

The oil price shock of 1973 -- when Wolfson was five years old -- triggered a stock market crash, soaring inflation and high unemployment. The viral contagion could become just as destructive.

Across Europe, more than 40,000 workers in retail were told they would be losing their jobs in the past week as stores from Paris to Madrid closed and shoppers were forced to stay home to avoid catching or spreading the disease. Dozens of retailers, including Wolfson’s Next, have withdrawn financial guidance and many deferred or suspended dividend payments to conserve cash.

“We need to prepare for a significant downturn in sales for the duration of the pandemic,” Wolfson said.

But even as some retailers shut their doors, supermarkets are having to take extraordinary measures to cope with unprecedented demand, as fear of the contagion prompts consumers to stockpile groceries.

Duncan Tatton-Brown, finance director at Ocado Group Plc, told reporters that the U.K. online grocer had received such a spike in orders in the past two weeks that its systems had reacted as if the company was under a “denial of service” cyberattack. It has since temporarily taken down its website to help it manage the overload.

Prime Minister Boris Johnson announced Friday that pubs, restaurants and cafes will be ordered to shut. That stops short of the mandatory shutdown of non-essential businesses imposed in France, Spain and other European countries, and leaves shop owners to plot their own course.

So far, Selfridges, Ikea, Sweaty Betty, and Reiss Ltd., among others, have announced they are closing their British shops temporarily. Others, like Primark and Next, are still open.

Greg Lawless, an analyst at Shore Capital, said retailers are reacting differently depending on their business model, the service they provide and their unique circumstances.

“Those companies that adapt quickly and do the right thing will survive, but we are in uncharted territory,” he said. “The retail landscape could look very different when the dust settles on this pandemic.”

The British Retail Consortium, the trade group, said decisions on store closures were up to individual companies. Its main focus was on helping to ensure that they can access government help quickly.

Retailers are also doing the unexpected by cooperating in a way that would have been unthinkable only two weeks ago. In the U.K., the government has temporarily relaxed elements of competition law to allow grocers to swap data on stock levels, share distribution depots and delivery vans, and pool staff to meet demand.

At least five grocers in Britain, including the discounters Lidl and Aldi, have announced plans to hire thousands of workers, including those being laid off by rivals, to help them cope with the surging demand for food.

Dave Potts, CEO of Wm Morrison Supermarkets Plc, said this week that the chain’s primary role now was to help ensure there was “confidence in food supply, which is crucial in a public health crisis.” He added that Morrison was “putting the assets of the company at the disposal of the country.”

In Germany, McDonald’s workers facing reduced hours and closed restaurants can keep working on a temporary basis for grocery chain Aldi, which is seeing surging demand from stockpiling, the companies said in a joint release. The arrangement will allow the fast-food workers to return to their McDonald’s jobs when things return to normal.

“Extraordinary times call for extraordinary solutions,” Nicolas de Lope, a spokesman for Aldi, said in the statement.

Harrods, the luxury retailer, said Friday it would temporarily close its famous store in London’s Knightsbridge neighborhood, but keep open its food hall -- best known for selling caviar, Wagyu beef, rotisserie chicken, seasonal game and handmade pasta.

“Harrods began its journey as a grocer, and we will continue as a grocer,” said Michael Ward, managing director. “We continued to trade and serve our customers during World War II, and only closed for a short period of time after the car bomb attack of the 1980s.”

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