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Focus on retail survivors when shops reopen on 15 June, says top analyst

Analysts expect a boost to the economy as people come out of furlough and shoppers are encouraged by clearance sales

Associated British Foods PLC - Government sets out plans to reopen all England retailers by 15 June

A new wave of shop reopenings could boost economic sentiment as workers return from furlough, while shoppers will look for bargains in the expected heavy clearance to get rid of stock.

Prime Minister Boris Johnson confirmed late on Monday that almost all non-essential retailers in England will be able to reopen in just over a fortnight.

Outdoor markets and car showrooms will be able to reopen from 1 June, as their larger spaces allow for easier social distancing, while all other businesses are expected to restart on 15 June.

READ: Are retailers dreading or looking forward to reopening stores when restrictions ease?

Clive Black at Shore Capital said that the best-placed stocks will be “survivors” of the crisis with strong balance sheets, with chances to seize opportunities that may emerge.

The former top-rated analyst highlighted Associated British Foods PLC’s (LON:ABF) Primark and Next PLC (LON:NXT) in the fashion space and pet products retailer Pets at Home PLC (LON:PETS), which has been trading at a limited capacity.

Shore Capital's head of research also pointed his at ‘house’ stocks - car seller Motorpoint PLC (LON:MOTR) and furniture chain SCS Group PLC (LON:SCS).

“Lockdown has caused considerable damage to the UK consumer economy, one that leads us to characterise calendar year 2020 as one of an earnings and dividend wipe-out,” Black said.

“Sales recovery, stock clearance and so margin depletion or otherwise will vary by sector and fascia but we expect 2021 to be one of stabilisation at this stage, much depending upon the level of collateral damage or otherwise to the wider domestic economy, with rebuild set for 2022.”

Various shops plus tailors, auction houses, photography studios and indoor markets will have to pass the government’s five tests to meet safety guidelines.

Retailers will be encouraged to store returned items for 72 hours before putting them back on the floor, to place protective coverings on large items touched by the public, as well as frequent cleaning of surfaces that are touched regularly, including self-checkouts and trolleys.

Hairdressers, nail bars, beauty salons and the hospitality sector remain closed because of the higher risk of transmission due to longer times of contact between people.

Businesses not complying with the law face fines and jail sentences of up to two years.

 

Quick facts: Associated British Foods PLC

Price: 1945 GBX

LSE:ABF
Market: LSE
Market Cap: £15.4 billion
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