GRAPHIC-ASOS, AO World and Ocado winners as online sales surge during UK lockdown

LONDON, Sept 3- A rapid shift to online shopping in Britain due to COVID-19 has boosted retailers’ sales and share prices, even though footfall in high street shops remains well below pre-pandemic levels. But although one in 10 physical shops remain empty, meteoric gains in major online players have helped the MSCI’s UK retail index outperform the country’s…

By Elizabeth Howcroft

LONDON, Sept 3 (Reuters) – A rapid shift to online shoppingin Britain due to COVID-19 has boosted retailers’ sales andshare prices, even though footfall in high street shops remainswell below pre-pandemic levels.

The half-a-trillion dollar retail industry suffered anear-fatal blow in March, when the United Kingdom enforced alockdown to limit the spread of the virus.

But although one in 10 physical shops remain empty, meteoricgains in major online players have helped the MSCI’s UK retailindex outperform the country’s benchmark FTSE 100 by ahuge margin.


Among the star performers are online grocery shops such asOcado Group which have seen demand surge as Britishpeople eat at home more.

The strength of supermarkets’ online offerings have been thekey determinant in how they have fared.

Ocado shares are up around 120% since the start of March,compared to small declines in traditional supermarkets such asTesco (down around 4%) and Sainsbury’s (down10%).

From March to May this year, the proportion of UK food salesmade online shot up to 11.3%, doubling within a few months,prompting Tesco to step up hiring to cope with the exponentialgrowth.

“The pandemic has digitised whole new sections of thepopulation,” said Clive Black, retail analyst at Shore Capital.”Online is here to stay.”

Online shopping as a proportion of UK sales surged in March,April and May. But while online shopping for non-food productshas since dipped, online grocery shopping remains elevated.


Online clothing giant ASOS is another starperformer, with shares up around 70% since the start of March aspeople working from home loaded up on loungewear.

Fast fashion company Boohoo had been quicklyrecovering from an early-March lockdown dip, until its shareprice took a hit in July when The Sunday Times reported on direconditions in one of its factories.

But, it soon recovered and in the 12 weeks to Aug. 25, ASOSand Boohoo grew the quickest within the apparel space and, alongwith JD Sports, gained market share, according to Barclaysequity analysts.


Pent-up demand has seen a rise in spending in homeimprovement sectors like DIY and furnishings, said Peel Hunt’sretail analyst John Stevenson, as many people saved money duringthe lockdown and, stuck at home, spend more on improving theirsurroundings.

Kingfisher, which owns DIY store B&Q, has jumped 47%since the beginning of March, while Dunelm is up around40%. British discount retailer B&M, was promoted toFTSE 100 after outperforming.

It’s not just furniture and decorations: Pets at Homeshares shot up more than 30% in July as demand forpets during the pandemic offset the impact of fewer ownersseeking its vet services. Morgan Stanley, Citigroup and Liberumhave all raised their target price since then.

Tech hardware firm AO World, one of the biggestwinners during the health crisis, has seen revenue surge bothduring lockdown and as it eased, with the share price up acolossal 187% as of Thursday.

“Fundamentally they’re probably going to end this year with50% more active customers than they had last year and thosecustomers aren’t suddenly going to switch away,” Peel Hunt’sStevenson said.


To be sure, the lockdown beneficiaries aren’t relying onpeople re-furnishing their home offices every quarter in orderto maintain their success.

“No one’s realistically expecting their sales to keep ongrowing at those crazy rates,” said CMC Capital Markets analystDavid Madden.

But in a world of ultra-low interest rates, there are fewerattractive options for investors quitting airline and travelstocks, he said.

($1 = 0.7529 pounds)

(Reporting by Elizabeth Howcroft; editing by EmeliaSithole-Matarise)

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