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Placer Bytes: Home Office Surge, Apparel's Bankruptcy Beneficiaries

Ethan Chernofsky
April 30, 2020
Placer Bytes: Home Office Surge, Apparel's Bankruptcy Beneficiaries

Office Supply Gets a Second Wind?

With the rise of social distancing and stay-at-home regulations came an increased focus on work from home. And this process may have given a second wind to brands like Office Depot and Staples. Analyzing traffic since the start of 2019, shows two clear trends. Firstly, both brands see their primary seasonal peak in August during the back to school period. Secondly, both brands are seeing significant declines with visits dropping over 10.0% year over year in January for Office Depot and Staples.

Yet, it does appear that the drive to work and study from home has given these sectors a boost. Daily traffic to Office Depot saw a peak on Saturday, March 7th, with visits coming in at 18.1% above the daily baseline for the period from January 1st, 2019 through April 13th, 2020. While, this is just 0.5% higher than the equivalent Saturday in 2019, considering most other days and weeks were seeing year-over-year declines of 10.0% or more, the stability can actually be seen as a spike.

The same is true for Staples who saw visits rise 15.1% above the baseline for that same Saturday, which was 0.9% lower than the equivalent Saturday in 2019. Yet, here again, considering the average year-over-year drop was significantly higher than this, the change actually represents an improvement.

There are many that speculate that the current situation could fundamentally change the way work is viewed pushing more people to spend more hours getting work done at home. Should this be the case, companies like Office Depot and Staples could be prime beneficiaries as they look to keep offices, wherever they are located, stocked with necessities.

Bankruptcy Beneficiaries

With concerns that retail giants Neiman Marcus and JCPenney could be facing bankruptcy, it is important to remember that this doesn’t mean the brands are going to disappear. However, it does create a strong likelihood that closures will be coming.

And with any company closing, the next question is who stands to benefit from a competition perspective? Looking at cross-shopping behavior for the period between January 2019 and February 2020 emphasizes a few brands that stand to gain. For JCPenney, off-price retailers look to benefit with over 40% of JCPenney visitors having also gone to a Kohl’s during that period while over 30% also went to a Ross, Macy’s, or T.J. Maxx. Burlington and Marshalls could also see boosts with around 25% of JCPenney visitors having also gone to one of these locations. Critically, these are nationwide numbers and in many regions, they will skew much higher or lower depending on the number and location of different branches.

For Neiman Marcus, the main beneficiary appears to be Macy’s with over 50% of visitors having also gone to a Macy’s location during that period. Nordstrom, Marshalls and T.J. Maxx follow with over 30% cross-shopping each. Interestingly, whereas Neiman Marcus tilts high end, many of the shoppers still heavily frequent off-price retailers as well, further supporting a sector that could be in for a boon.

Will home offices continue to boost Office Depot? How will bankruptcy processes affect the wider apparel space?

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