Bulk-buying bolsters retailers' share prices
Juliet Mann

Have you been inside a supermarket lately? I bet you have. And I bet you had trolley envy: not the kind where you were inspired by the treacle tart the person in front of you unloaded on to the conveyor at check out. Nor the kind when you spy a heavily discounted joint of meat, a tempting artisan loaf or new brand of chocolate that makes you wish you had explored the confectionary aisle a little longer. 

This time, the game has shifted and you wonder how that person in front of you found all that toilet roll, pasta, hand-sanitizer and paracetamol.

Even online shopping has become a battleground. The earliest slot I could book on Tesco Online was 20 days off. I booked it anyway. Online supermarket Ocado brought in extra IT resources to cope with the surge in demand. For days I couldn't even log in to the system. When I did, I was number 5,289 in the queue, with an estimated wait time of two hours. I did manage to log in eventually but even then, for many of the items I wanted to load into my basket, the site said: "Sorry, out of stock."

One of the biggest public concerns throughout the COVID-19 crisis has been a good supply of essential food and household items.

Authorities in France and Germany have insisted there is no food shortage and urge consumers to be mindful about what they are stocking up on.

Yet, despite those assurances that stuff won't run out, people are panic buying in bulk, clearing the shelves.

Despite emergency notes asking customers to limit purchases, shelves are still empty across Europe /Paul Ellis/AFP

Despite emergency notes asking customers to limit purchases, shelves are still empty across Europe /Paul Ellis/AFP

A survey from Italy's supermarket industry association Coldiretti found 38 percent of Italians are stockpiling food and drinks over the "unjustified fear" of shortages.

Coldiretti's survey reported a jump in sales of products with a long shelf life, with an 80 percent increase in flour sales, a 60 percent increase in canned meat and a 55 percent increase in tinned vegetables. Pasta and rice sales were up 51 percent and 39 percent respectively.

In Spain, in a joint letter to the media, the Spanish Association of Distributors and Supermarkets (ASEDAS), the National Association of Large Distribution Companies (ANGED) and the Association of Manufacturers and Distributors Companies (AECOC) called for calm.

The country's retailers are "prepared to serve the population in extraordinary circumstances," said the director-general of ASEDAS, Ignacio García Magarzo.

In the UK, supermarket chains including Sainsbury's, Lidl, Iceland and Tesco have been introducing a range of measures in their stores to manage the mayhem.

Certain essentials are being rationed. Ocado, for example, will only allow one pack of 24 toilet rolls per order. Sainsbury's has also begun restricting the number of items people can buy in one go – a maximum of three of any grocery item and maximum two of popular products including toilet paper, soap and long-life milk.


Shares silver lining

With the high demand for food and pharmacy items, it might actually be good news for supermarket shares. An unexpected bright spot amid the financial markets doom and gloom.

Analysts expect some supermarket stocks to significantly outperform in the months ahead, particularly since investors are finding havens, such as gold, failing to provide much respite from the global sell-off.

"The supermarket sector has started to separate from the pack this week, with public perception shifting as the aisles begin to empty," said Josh Mahoney, senior market analyst at IG.

"Ocado, the online retailer has been enjoying an incredible few years, with the stock currently 536 percent up from the lows seen in the Q4 2017," he said.

Tesco stock has started to gain ground again, while shares in Sainsbury's have also risen this week. Morrisons had been on the slide over the past 18 months, but investor interest is perking up.

In the U.S., warehouse-style bulk retailer Costco is another retailer investors have an eye on.

"Costco has seen a surge in demand for coronavirus-related products, such as dry grocery, cleaning supplies, hand sanitizers, and water filtration products. This is partly offset by softer trends in its travel and auto businesses.… Costco's strong relationship with vendors is helping to maintain regular deliveries, although it has been challenging to keep up with the demand in certain categories." said Telsey Advisory Group's Joe Feldman.

And big U.S. retail name Target is also on analysts' radars.

"An increase in traffic as consumers start to stock up on essentials in reaction to the coronavirus, could be an incremental positive and can further support [first-quarter] results… Target is making substantial improvements to its business, which we believe could position the company well to take market share from other declining retailers," according to Karen Short, managing director at Barclays Investment Bank.

This coronavirus crisis may well benefit the supermarket sector for now, with any further restriction of people's movement, such as lockdowns, driving stockpiling. 

Restaurant demand, however, looks certain to suffer throughout this crisis, which means more of us will be home cooking – and for that we need to keep buying the ingredients. When things eventually return to normal, the supermarket price surge could end. 

But right now, nobody is putting any bets on when that might be.