Saving Christmas: A EUR18bn challenge for French non-essential retailers

Restrictions on non-essential stores in France ahead of a critical Christmas season are casting a shadow over nearly EUR18bn of retail sales that are normally made in those stores in November and December. First, retail data show that the strong demand from June through September was not enough to fully compensate for the eight-week lockdown from the end of March to mid-May: year-to-date sales were still, on average, 10% below their 2019 levels, with strong disparities between segments. Second, the weeks prior to Christmas are amongst the most important in terms of turnover across a vast majority of segments. 
 
However, in our view, the second lockdown could have a somewhat softer impact on demand than the first one, which saw turnover collapse by 78% on average in April.
 
What does this mean for companies? Should stores be allowed to reopen at the beginning of December, the most obvious and immediate impact on the industry would be a net negative impact on turnover. In a base case where retail sales in segments facing restrictions contract by 60% in November, retailers would lose an aggregate EUR4.4bn in turnover – all else unchanged, the equivalent of a -510bp hit to annual turnover growth. 
 
In a particularly adverse yet realistic scenario where the sanitary situation demands store closures to last until the end of December, the magnitude of the impact could hardly be understated. A two-month closure would amount to EUR10.8bn in lost sales, or the equivalent of a -1200bp hit to 2020 annual turnover growth.

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Aurelien Duthoit
Euler Hermes