SINGAPORE (Apr 16): With the circuit breaker measures announced, non-essential workplaces have been ordered to close until May 4 to help contain the spread of Covid-19 in Singapore. Food establishments and hawkers will remain open but only for takeaway or delivery services.
In a Wednesday report, DBS Group Research lead analyst Alfie Yeo says, “This is positive for supermarkets and affordable mass-market foodservices outlets. As people are encouraged to stay home as far as possible, we expect retail spending on food staples to strengthen further.”
With the measures in place, there are much fewer people out and about in Singapore. The government reported that transport ridership and traffic volume has fallen by more than 70% since the start of the Circuit Breaker, with close to 80% of the workforce now working from home. There are reportedly fewer people outside as well, with 30-40% of individuals out on weekdays and only 20-30% out on the weekends.
Despite this, supermarket sales continue to be brisk after strong showing in February.
Overall retail sales in February declined by 8.6% y-o-y (-10.2% excluding motor-vehicles). But supermarkets bucked the trend, growing strongly by 15.5% y-o-y. Discretionary sales plunged, with sales for watches & jewellery, department stores, and apparel & footwear falling by 23-41% y-o-y.
DBS is reiterating its positive stance on supermarkets and keeping its “buy” recommendations on Sheng Siong and Dairy Farm International, while avoiding higher-end restaurant operator Jumbo.
“A prolonged battle against Covid-19 would be positive for [regional] supermarket stocks, as long as social distancing is encouraged,” says Yeo.
Should the current measures by the various governments prove ineffective to achieve their containment outcomes, any extension of the current measures for consumers to stay home would benefit supermarket players.
As workplaces and schools remain closed during the Circuit Breaker period, the analyst sees a stronger shift of food consumption at workplaces and schools to homes during the next month. This will result in brisk sales at grocery retailers, F&B foodservice outlets near residential areas, and online channels.
On the other hand, this is a bane for restaurant operators as a significant portion of Singapore’s workforce stay away from their workplaces.
As at 10.45am, shares in Sheng Siong and Dairy Farm are trading at $1.39 and US$4.91, respectively.
