Amid all the hullaballoo over Britain leaving the European Union (“Brexit”), TWICE wondered which specialty retailers will be impacted by the move the most.
Well, we didn’t have to wonder long. Credit Suisse retail analysts Seth Sigman and Kieran McGrath have assessed some of this country’s largest hardline retail chains by eight separate metrics, including direct sales exposure to Britain and the European Union, and past performance during economic upheavals on the Continent.
Their overarching conclusion: Aside from a possible 500-basis-point stock-price shearing, the impact will largely be minimal, as most CE and appliance imports arrive via Asia and Mexico and, with three key exceptions, most global chains like Best Buy, Lowe’s and The Home Depot do the majority of their non-U.S. and Canadian business south of the border.
The exceptions are GameStop, Office Depot and Staples. GameStop does about 14.5 percent of its business in Europe and 6.3 percent in Australia; Office Depot derives about 19 percent of its offshore sales from France and Sweden mostly; while Staples’ 15 percent of offshore sales largely originate in Great Britain.
What’s more, Office Depot, due to its greater Continental exposure, suffered the deepest downturns during past European crises like the economic instability in Greece and various Euro debt issues.
Those concerns aside, Sigman and McGrath believe the impact on retailers from a stronger U.S. dollar and resulting foreign exchange volatility will be minimal, and that consumer spending at hardline chains should continue to outpace other sectors of the U.S. economy.
Oh, and there may even be some upside to this whole thing. If the Fed continues to keep interest rates low amid the Euro market mayhem, home buying and home improvement — the bedrock of the appliance and integration businesses, if not all consumer spending — should continue to grow.
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