Top 25 retailers by market capitalization in Q1 2020 see QOQ decline with exception of Amazon and JD Sports, says GlobalData

Most of the top 25 publicly traded global retailers by market capitalization (MCap) reported quarter-on-quarter (QoQ) declines for the first quarter (Q1) ending 31 March 2020, with Amazon and JD.com being exceptions, according to GlobalData, a leading data and analytics company.

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Keshav Kumar Jha, Company Profiles Analyst at GlobalData, comments: “Amazon’s share price recovered by 15% during March 16-31, after a 22% fall during February 19-March 16. Increased online sales and a robust business portfolio comprising e-commerce, cloud computing and streaming has helped the company to reverse the trend of sliding MCap.

“Meanwhile, JD.com’s improved financial performance during FY2019 helped it gain traction and its stock improved 15% during Q1 2020. The company’s ability to offer uninterrupted timely service across China during the lockdown also helped to win investors’ confidence.”

E-commerce giant Alibaba saw its stock fall by 8% during the period due to fear of a reduction in consumer demand resulting from the coronavirus outbreak.

Jha explains: “Rising fear of economic slowdown due to COVID-19 not only led to continued sell-off in stock markets, but also hit Walmart and Costco’s stocks, which declined 4.4% and 3% respectively in Q1 2020.”

The overall list witnessed an 8.2% decline in aggregate MCap as of 31 March 2020 (Q1 2020), which stood at US$3.1 trillion, as compared to US$3.4 trillion as on 31 December 2019 (Q4 2019). A total of 13 companies cumulatively accounted for approximately 30% of total MCap, and each reported over 15% decline in their QoQ MCap. Amongst these 13 retailers, Home Depot and NIKE were the only two companies with over US$100bn in MCap.

Jha continued: “The planned investment in store enhancements and digital capabilities expansion resulted in lower earnings guidance than investors’ expectations for FY2020, which failed to win their confidence. For example, Home Depot’s stock plunged 15% during Q1 2020. The decline in share price was also due to the reduction in store traffic mainly caused by reduced operating hours following the rapid spread of novel coronavirus in the US after March 15.

“NIKE also recorded an over 18% decline in its share price in the first quarter mainly due to the outbreak of COVID-19 worldwide. Around 75% of company-owned and partner stores in China were temporarily closed for a few weeks in February, whereas all NIKE-owned stores outside of China, Japan and South Korea were closed from March 16 to curb the spread of the virus.

“US-based pharmacy retailers, CVS Health and Walgreens Boots Alliance also recorded huge dips in their QoQ MCap. Concerns related to the rise in medical claims for CVS Health’s health insurance business, Atena in the wake of increasing COVID-19 patients in the US seemed to have dented investors’ confidence in the company’s shares.”

Apart from heightening concerns related to COVID-19 in the US, weak bottom-line of Walgreens Boots Alliance in the first quarter FY2020 resulted in the MCap shedding over 22% dip.

Jha concludes: “The real impact of coronavirus is difficult to assess at this time, but the lockdown imposed by several governments worldwide will impact normal operations of manufacturing facilities. This could disrupt stock-replenishment cycles, and may lead to stock-out conditions. Additionally, social distancing measures and reduced normal operating hours could result in further declines in stores traffic. The success of major e-commerce retailers may also force the companies to invest more in strengthening their omni-channel presence.”

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