This report presents Coresight Research’s updated Retail Robustness Index (RRI), which evaluates the 100 largest US retailers (by revenue) on their ability to weather the dramatic demand shifts due to the coronavirus crisis in the US. We evaluate retailers based on financial health, sales capacity, product mix and management tenure. Discussion In this update, the average score across the full index increased by more than one point, to 51.5 from 50.2 from August, primarily owing to higher sales capacity due to store reopenings—which are currently running at above 95%—more than offsetting decreases in other metrics. Financial health declined slightly, due to retailers’ net losses more than offsetting cash raised in the second quarter (2Q). The month of August includes most of the retail 2Q earnings reports, with about 80% of retailers having reported. Two retailers—Stein Mart and Tailored Brands—filed for bankruptcy. Additional filings are possible due to the still-difficult retail conditions, but retailers are likely to try to persevere in order to participate in the key holiday selling season. Monthly Changes of Overall Retail Robustness Index Figure 1 shows the changes in the overall RRI and its components since March 2020. We outline the components and methodology later in this report. [caption id="attachment_116267" align="aligncenter" width="700"] Note: The index includes new weightings and methodologies for sales capacity and product mix starting in July 2020.
Source: Coresight Research [/caption]   The main driver of higher RRI scores has been sales capacity, which has increased over the past four months due to store reopenings. Financial health has remained flattish to slightly down, and product mix has generally improved but turned down slightly in August. September RRI Outlook September is likely to look much like August, as retailers continue to reopen stores, offset by a few temporary closures in areas experiencing Covid-19 outbreaks. There is also likely to be a paucity of new financial data due to the majority of retailers having reported in August. Continued losses are likely to cause a further deterioration in financial health, and product mix will shift with the end of the summer season and with many workers and consumers returning to work and school. Top 10 Retailers by RRI Ranking Figure 2 presents the 10 retailers that rank highest in our index as of the start of September 2020. The overall changes in most of the top 10 RRI scores were modest due to a lack of updated financial data and little change in the number of stores open. Two of the retailers had large score changes, as discussed below.

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Figure 2. Changes in Retail Robustness Index: Top 10 Retailers [wpdatatable id=452 table_view=regular]

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Note: Differences in score changes are rounded. Source: Coresight Research   Commentary on Score Changes Some retailers saw more pronounced score changes, which we outline below.

• Steven Madden (increase of 17 points): Higher sores for financial health and sales capacity.
• Columbia Sportswear (increase of 15 points): A higher score for sales capacity.
• Ollie’s Bargain Outlet (decrease of 13 points): A lower score for financial health.
• Chewy (decrease of 11 points): A lower score for financial health.
• Amazon (increase of 11 points): A lower score for financial health.

Retail Robustness by Segment The figure below shows the RRI by general segment. [caption id="attachment_116268" align="aligncenter" width="700"] Source: Coresight Research[/caption]  

• Food ranks the highest due to its high product mix and availability, since it is an essential category.
• Beauty ranks above average due to the inclusion of essential health and wellness products in this category despite consumers currently buying less of these products than before the crisis.
• Furniture, electronics and clothing rank below average due to consumers currently purchasing less in these product categories than pre-pandemic.

Analysis Methodology The Coresight Research Retail Robustness Index evaluates the 100 largest US retailers (by revenue) based on their ability to weather the current shifts in demand due to the coronavirus crisis. Figure 4 outlines the components and weighting of the index.

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Figure 4. Coresight Research Retail Robustness Index: Components and Weighting [wpdatatable id=453 table_view=regular]

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Source: Coresight Research   A more detailed discussion of the index methodology is included in the appendix of this report. Additional notes on the Coresight Research Retail Robustness Index:

• The index is a model for retailer robustness based on selected weights and factors and relies on certain assumptions and estimates.
• The environment is evolving dramatically at a fast pace: Figures are thought to be accurate as of writing but may change as companies continue to report quarterly earnings.
• The index is not a predictor of investment performance. Retailers with higher financial-health scores are much less likely to file for bankruptcy than retailers with low scores.

August 2020 Retail Robustness Index See the full list of companies and their composite and total scores below. Our full list includes selected retailers that are also major brand owners such as Gildan, Hanesbrands, NIKE and Under Armour. In this index update, we added the next two largest retailers, Floor & Decor and Genesco, to replace Stein Mart and Tailored Brands, which have filed for bankruptcy protection.

• Floor & Decor is a specialty retailer of hard-surface flooring, including related tools and accessories.
• Genesco is a specialty retailer that sells footwear and accessories in retail stores in the US, Canada, the UK and Ireland.

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Figure 5. Coresight Research Retail Robustness Index: Full List [wpdatatable id=454 table_view=regular]

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Figures may fluctuate due to rounding; Green represents an increase from the previous update in August, while red represents a decrease. Source: Company reports/S&P Capital IQ/Coresight Research

Appendix

Retail Robustness Index Methodology The individual components are discussed further below.

• Retailer financial health (40%): Represents a retailer’s financial state and ability to handle financial challenges. Commentary: Many retailers have drawn on their credit lines and/or issued debt offerings and reduced expenditures, which bolsters their financial position. One component of this score is the market value of a company’s stock, which affects its ability to raise additional capital.

• Sales capacity (20%): Represents a retailer’s ability to sell products. Commentary: This score is based on the percentage of each retailer’s stores that are currently open.

• Product mix (20%): Determines the relative benefit of a retailer’s product categories. Commentary: The score is calculated from a weighted average based on Coresight Research weekly consumer surveys.

• Management tenure (20%): Reflects the number of years that the CEO has served in the position. Commentary: CEOs who have occupied their positions for longer should be better acquainted with the company and better equipped to navigate the current environment.