Drop in retail sales for May less than that in April, with easing lockdown restrictions

Summary

• Large retail chains have reported a drop of 5.9 per cent in their sales figures for May this year
• Retail sales fell by a whooping 19.1 percent last month
• Online retail is the only segment that has performed well
• Mulberry retail chain plans to lay off 25 percent of its workforce

The British Retail sector had marked a much-improved performance in the month of May 2020 compared to April when the Lockdown was still in place. The British Retail Consortium, the industry body of retail companies in the United Kingdom, has come out with its monthly update on the performance of the sector for the month of May 2020. The consortium has reported that for the month of May this year, most of the large retail chains have reported a drop of 5.9 per cent in their sales figures compared to what they were a year ago. This is a sharp contrast to the 19.1 per cent drop in sales in the month of April, which was the second-biggest drop in monthly sales figures since BRC started to conduct its survey in 1995.

The retail sector had shown a lopsided performance during the lockdown period, imposed to stop the further spread of coronavirus. While the shop floor segment of the retail sector displayed a very dismal performance, the online retailing segment of the industry staged a record-breaking act with online sales for non-food items clocking a 60.2 percent rise in May, as compared to the corresponding period last year. The Lockdown period forced people to stay inside their homes, for the fear of contacting the coronavirus, which created problems in going out and fetching essential provisions, and had to be addressed urgently. Sensing this opportunity, the online retailing sector started to deliver essential commodities at their doorsteps. During the lockdown period, while all other commodities saw a contraction in sales, food items and other essential household provisions saw a major spike in demand, This was also the only segment that was raking in major revenues in the retail sector.

The opening up of the economy from the lockdown has brought about a new lease of life to the traditional shop floor retailing, with hopes that more and more people will be walking inside the malls, with each passing day. But with the corona fear factor still being and new infections still being found across the country, the situation could take a long time to improve, before retail businesses get back to pre-corona levels. The social distancing measures, which are still in place, will keep a lot of people away from retail establishments. Unless a vaccine is found and is available for a majority of British population to use, things will not be as they used to be earlier. In the meantime, online retail will continue to perform better and online retail companies will continue to keep making money, at least on essential goods and services.

As a consequence of this low-demand scenario, many retail majors have been forced to lay-off staff since there are almost nil footfalls in the malls, despite easing of Government restrictions. One such retail group is the Mulberry Group, which has recently decided to lay off one fourth of its total workforce. Let’s now take a closer look at its performance during the last month, since the time when lockdown was partially lifted.

Mulberry Group Plc – (LON:MUL) Mulberry Group Plc is a British luxury brand founded in the year 1971. The Company engages in Retail and Design divisions. Retail includes sale through shops and department store of its branded fashion accessories, clothing, and footwear. Management of the brand and other activities such as marketing, design, manufacturing, etc. are operated through the Design division of the Mulberry Group. The company has retail outlets in the United Kingdom, Continental Europe, the United States of America, Australia, and Asia. Recently in February 2020 British Entrepreneur and billionaire Mike Ashley of the Frasers group bought a 12.5 per cent stake in the company worth £19 million.

The shares of Mulberry Group Plc are listed on the London Stock Exchange, and here they form part of the FTSE AIM All-Share index. The shares of the company have a ticker symbol of MUL.

In the past month, since the lockdown was relaxed in the country, the shares of the company have witnessed a sharp rise in its prices. On 11^th of May 2020 the shares of the company were trading on the London Stock exchange at GBX 181.00 and on June 10, they traded at GBX 214.82, down by 4.10 percent at 11:50 am GMT+1.

Mulberry Group Plc mulls laying off a quarter of its staff

The company recently came out with an announcement that it has initiated a consultation process whereby it will reduce its global workforce strength by at least a quarter. The company which has a global staff strength of around 1,400 out of which 25 per cent works out to be 350, now face risk on their jobs.

Since the lockdown conditions have started easing in several countries, the company has also started to open its stores. It recently announced that it had opened several of its stores in China, Europe, South Korea and Canada, the stores in the United Kingdom, however, will open only after 15^th of June 2020.

The chief executive of the company Thierry Andretta said in a statement on the subject of job cuts that they were necessary to respond to the current challenging market conditions. He further stated that the company's online portal has been making a good trade, but the revenues from that division were insufficient to fully compensate for the losses that the company has suffered because of the prolonged shutdown of its stores across all its geographies. The company expects that there will be a gradual recovery in its fortunes and the process is very much contingent on how countries are able to deal with the pandemic.

The company is one of the many luxury fashion brands based out of the United Kingdom who are facing a similar situation. The gradual opening up of the British economy will certainly bring back customers to the companies outlets, but the company will not be as badly impacted by the social distancing measures as other retailers. The company being a premium brand attracts only high-end customers and not the large masses. Since it can easily ensure the applicable social distancing measures for its select client-base, the main factor in bringing back the sales is that people start to shop again, as usual. It is also pertinent to note that a large part of its demand comes from foreign tourists, Mulberry being a luxury brand, which continues to be impacted for the time being.

With the retail stores for non-essential products and services slated to open from June 15 onwards, there is a wave of optimism about the sector getting back to its good footfall days and high-demand times once again. However a lot of complex market forces, apart from the falling corona infection curve, will actually determine the final scenario of the UK retail sector.