StockBeat: TFW You and Covid-19 Both Want a Lockdown-Free Christmas

By Geoffrey Smith

Investing.com -- What price Christmas?

The unspoken – and in some cases explicit – aim of many measures enacted in Europe in recent weeks was to ensure that families could hold their traditional Christmas and New Year rituals free from the oppressive hand of lockdown and social distancing.

But the continent is in a race against time: while there are signs that infection curves are falling, or at least flattening, in most major markets, governments are refusing to be drawn into a premature relaxation of restrictions.

The trouble is that what governments and electorates wish for - a restriction-free Christmas and new year - is also what the virus itself most desires.

The uncomfortable reality is that most people’s idea of the holiday season in Europe is a glorified sequence of superspreader events: the office party, shopping in crowded malls, the seasonal drinking, the big family get-together and, not least, church services. The possibilities for infection are beyond counting.

Governments have been here before. Earlier in the year, they moved heaven and earth to let the summer tourist season take place as close to normally as possible, knowing that public consent to the lockdowns of spring was limited, and anxious to give people hope in a return to normal life.

However, those efforts largely unravelled as the virus immediately began to spread through crowded planes, bars and tourist attractions. The result of that is the second wave now spreading through Europe.

Whether governments now indulge the public’s desire for freedom or keep the restrictions in place could have a significant impact on many European companies: drinks companies will surely suffer, whether distillers like Diageo (LON:DGE) and Remy Cointreau (PA:RCOP) or soft drinks specialists like Fevertree (LON:FEVR) and Coca Cola’s European bottling operation HBC (LON:CCH).

Brewers and pub and restaurant operators like Marston’s (LON:MARS) will face particular challenges: Christmas drinks and lunches will be cancelled, not postponed, and while you might still give a loved one a bottle of champagne or whisky for Christmas, you probably aren’t going to give them a six-pack of Heineken (OTC:HEINY) or Carlsberg (OTC:CABGY). At least, we hope you’re not.

For the supermarkets and foot retailers too, scaled-down Christmas dinners are bad news. Less footfall will continue to mean fewer impulse purchases.

However, this need not translate 1-for-1 into lower overall spending, and this is the important point, given that some 20% of retail sales come in the six weeks before Christmas.

Logically, the money saved on all of the above can be redirected to other spending: a slightly better piece of jewellery, (Pandora (OTC:PANDY) and Richemont (SIX:CFR)), classier chocolate selections (Lindt&Spruengli AG (SIX:LISN), Hotel Chocolat (LON:HOTC)) or other higher-value consumer durables. Corporate reports from the second quarter showed a recognizable pattern of indulgence on small luxuries, and the urge to make up for a Christmas spoiled in some respects by lockdowns will surely find its way into expressing itself.

The holiday season is sure to be different, but for stocks it isn’t predestined to be a washout.

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