Retail Takes Hit Amid Coronavirus Fears From Nervous Shoppers

March 4, 2020

Americans are getting scared to go to the store as fears of a COVID-19 outbreak spread in the U.S. Foot traffic in retail fell 3.3% in the week through Feb. 28. That follows steady gains in January, according to data from Prodco Analytics. Store traffic has been dropping as consumers’ concerns about the virus grow. Stores that sell apparel are affected most at this stage.

COVID-19 is caused by a member of the coronavirus family that’s a close cousin to the SARS and MERS viruses that have caused outbreaks in the past.

Consumer sentiment dropped on Monday to the lowest level since mid-December. Americans are more pessimistic about their personal finances, reports show.

“The implications for retail could be larger than initially anticipated from both demand and supply chain perspectives,” Oliver Chen, an analyst at Cowen & Co., wrote in a note. He noted that potential “severe retail traffic declines,” falling consumer confidence, and potentially temporary store closures in the event of an outbreak could cloud retailers’ full-year outlooks.

In response, Walmart officials said they expect a negative financial hit in the first quarter due to the outbreak. But CEO Doug McMillon has vowed to keep stores open, as they’ve done in China through its outbreak. “Customers need us,” he said in public comments. “We do it with hurricanes in the U.S. We’re doing it with this situation in China.”

Home Depot gets about 30% of its products from China, the epicenter for the COVID-19 outbreak. Seth Basham, the managing director of equity research at Wedbush Securities, says that “consumer uncertainty” could prompt shoppers to delay larger home improvement projects. The home improvement sector could take a hit until the outbreak subsides, analysts predict.