Coronavirus panic set to change shopping, says UBS

ELI GREENBLAT

MARCH 17, 2020

The panic buying at Australian supermarkets in the wake of the coronavirus pandemic could have sent sales at chains such as Woolworths and Coles skyrocketing more than 25 per cent.

It could also lead to a long-lasting change to consumer behaviour once the pandemic has passed, with the crisis potentially driving a greater take up of online shopping and a return to cooking at home rather than dining out.

A new report from UBS analyst Ben Gilbert says sales in supermarkets have spiked significantly, with his channel checks suggesting sales are up more than 25 per cent year on year across stores in recent weeks.

“This is consistent with global trends where the UK has seen categories such as tissues and pasta up over 50 per cent for the week commencing 1 March,” Mr Gilbert said in a report to UBS clients citing Nielsen as his source.

That said, increased sales have come with increased costs through the supply chain, which limits the level of operating leverage UBS might normally expect.

UBS now forecasts first quarter industry supermarket sales to be up 9.5 per cent year on year and second quarter up 6.1 per cent before moderating to around 5 per cent in the third and fourth quarters of 2020.

UBS Is lifting earnings per share across Coles, Metcash and Woolworths for fiscal 2020 to reflect this. Mr Gilbert’s rating on Coles moved to neutral from sell), while Metcash moved to buy (from neutral and Woolworths moved to buy from Neutral.

UBS also believes the COVID-19 pandemic will embed new consumer behaviour, potentially leading to an acceleration in the rate of online sales penetration of both grocery and fast food, and is likely to see a return to cooking at home, at least in the near term.

The assessment came as Woolworths confirmed on Monday it had sold seven weeks’ worth of toilet paper in seven days, with the demand so great from shoppers rushing the stores and stripping the shelves that Woolworths, Aldi and Coles have brought in a raft of buying restrictions on certain food categories and other grocery items such as hand sanitisers and toilet paper.