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5 ways to profit from the death of the high street

The UK retail industry posted its worst year on record in 2019. Sales actually fell – for the first time in 24 years – due to carnage on Britain’s High Streets.

I’m not talking about yobs rampaging around town centres on a Saturday night. Even the vandals are busy nowadays at home ordering food from Uber Eats and checking out the talent on their dating apps. Drunken online shopping is for most a bigger danger.
The High Street just isn’t where the action is, and retailers know it. Chains have been shutting up shops and operations large and small have gone bust. Restaurants and pubs are suffering, too.
Shareholders have felt the pain. We’ve seen listed companies like Debenhams go under, while even those that struggle on post profit warnings as routinely as they hold their latest sales. Only this month the once-mighty Superdry revealed revenues fell a thumping 16% over the crucial Christmas quarter.
The pain is showing up at the landlords that own much of Britain’s retail square footage, too. Landsec and British Land are trading at deep discounts to book value, as investors have cast a sceptical eye over their prospects.

High Street Lowdown

As a natural contrarian, I’ve looked for opportunities to buck this trend. For example I believe those two REITs are probably better placed for the long-term than their discounts to book value might imply.
But so deep are the High Street blues that even I wonder if it’d be better to swim with the tide, rather than fight it.
True, shopper apathy and a shortage of revelry might be partly down to years of subpar economic growth in the uncertain aftermath of the EU Referendum. Perhaps we’ll begin feeling our way out of the confusion, with the Conservative majority government now sure to take us out of the European Union.

Personally I think there’ll be more bumps in the road. Anyway it’s clear online retailing is doing more damage to traditional retail than Brexit ever could. The same might be said about meal delivery services like Deliveroo and UberEats, and even dating apps.
Unfortunately we can’t invest in Deliveroo or UberEats in the UK. If you’re happy buying US shares though, then Uber Technologies is available, as is the 900 billion dollar gorilla, Amazon which is trying to buy into Deliveroo.

Made in Britain

 There are though a few other ways to play the Death of the High Street in our tech-starved home market.
If it’s a department store killer you want – or a Superdry smasher for that matter – how about ASOS or Boohoo?
The former has been recovering after overseas expansion disrupted its normally slick operations, but the latest updates suggest it’s working through its problems. Meanwhile Boohoo goes from strength to strength. UK sales rose 42% in the last three months of 2019, which rather makes a mockery of the idea that all the High Street’s woes are down to consumers’ macro-economic concerns.
Some may remember that in the early days of Internet retail it was thought clothes shopping would remain a real-world activity, since people liked to touch and try things on. Ever better graphics, speedy shipping, and easy returns put pay to that theory.
The last bastion is now said to be groceries. If you’re sceptical that there is any last bastion, you could consider online grocer and tech platform Ocado. It’s been restructuring and refinancing to pivot away from delivering its own groceries to providing the technological savvy to help other retailers do the same. This is becoming a global concern that might shake up shopping from Inverness to Indonesia.
Of course lots of shops on British High Streets don’t carry any stock – because they’re estate agents. Even a bijou London flat can’t be squeezed onto an agent’s shelves. But online can beat them for inventory, since Internet listings can be infinite and buyers prefer to find them all in one place. That formula has made property portal Rightmove a dominant force. A gatekeeper to the Great British property buying public, it is currently in an alliance with traditional agents who still do most of the legwork and pay Rightmove to list their properties. I wouldn’t be surprised if Rightmove eventually swallows more of the value chain, however, and estate agents leave the High Street, too.
Another way to invest in the triumph of online shopping is to actually invest in bricks and mortar – or maybe aluminium and asphalt. LondonMetric Property has transformed itself into a prime way to play online logistics. Roughly three-quarters of its portfolio consists of distribution-related assets, often enabling the ‘last mile’ deliveries that take all those billions of cardboard boxes to our front doors. 

Luxury share shopping

We may lament the busy High Street of our youth, but as you can see there’s plenty of ways to console yourself by trying to profit from what’s killing it.
There’s just one snag, which is none of these shares look cheap. Rather, they all seem to me priced at various levels of expensive. Even LondonMetric is trading at a 30% premium to book value, compared to similar sized discounts on the other REITs I mentioned.
That’s the trouble with this revolution – it’s hardly a secret. The question for investors in the pricey disruptors is how far is there to go, and can the High Street do anything to fight back? Which is of course exactly the same question that those bottom-fishing for beaten-up retail names are asking, too…

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended boohoo group, British Land Co, Landsec, LondonMetric Property PLC, Rightmove and Superdry. Owain Bennallack owns shares in Amazon and ASOS. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro.