Return to past shopping glories unlikely

Queues outside Penneys should not be taken as barometer of future viability of high street

Commercial landlords in the retail space will have watched the scenes from Penneys as it reopened last week with a certain amount of glee. As shopping centres in the State emerged from the lockdown yesterday, including the Dundrum Towncentre, they'll now hope that consumers close their laptops and revert to form.

But a return to past glories seems unlikely as the Covid-19 crisis appears to have accelerated problems that were already festering. The share price of Dundrum Town Centre co-owner Hammerson is a decent proxy for investor sentiment towards the bricks and mortar retail sector.

In April 2007, before the global financial crash, Hammerson’s shares were trading at £16.52 while yesterday they were changing hands for just more than a quid.

So what has changed? Hammerson’s assets were valued at the end of 2007 at £7.3 billion while in December they were valued at £8.3 billion. Its net debt in 2007 was £2.49 billion while only six months ago it was £2.8 billion.

On the face of it, Hammerson’s fundamentals don’t appear to have shifted so substantially as to warrant a 94 per cent reduction in its share price.

However, consumer sentiment and shopping habits have moved dramatically in the meantime. Online shopping has only grown enormously in popularity while retail has had its fair share of setbacks over the past decade, particularly in the UK.

Hammerson’s future, therefore, may lie in its ability to shift focus to residential real estate near its retail assets, something it is planning property it owns in Dundrum, for example. This might have the dual benefit of providing a stream of new customers on the Towncentre’s doorstep.

Goodbody analyst Colm Lauder suggested in a recent analysis that its future lies in its ability "to reposition through disposals".

Where this all ends is anyone’s guess but the long queue outside Penneys last week should not be taken as a barometer as to the future viability of the high street.