JD Wetherspoon plc (LON:JDW) shares soared on Friday after it posted a rise in profit for the half year. Shares in the pub company were up by over 30% during trading on Friday. For the 26 weeks ended 26 January 2020, profit before tax rose by 15.2% to £57.9 million, up from the £50.3 million figure recorded during the same period a year prior. Meanwhile, revenue grew by 4.9% to £933 million and like for like sales were up by 5%. Commenting on the future, the Chairman of JD Wetherspoon Tim Martin said that it is “very difficult” to make predictions as the COVID-19 outbreak continues to develop. Sales have been declining at the pub company as people are being told to social distance. “In the early part of the current week, following the Prime Minister’s advice to avoid pubs, sales have declined at a significantly higher rate,” Tim Martin said. “It is obviously very difficult to predict, in these circumstances, how events will unfold in future weeks and months, but we now anticipate profits being below market expectations, so long as the current health scare continues. As a result of this uncertainty, it is impossible to provide realistic guidance on our performance in the remainder of the financial year,” the Chairman added. “The company has decided to delay most capital projects and to reduce expenditure, where possible, including the cancellation of the interim dividend. As a result of these actions, combined with the Government’s proposals on business rates relief and credit guarantee facilities, the company believes it has sufficient liquidity to maintain operations at a substantially lower level of sales.” “As many companies and commentators have noted, the current health crisis places the hospitality industry, in particular, under great pressure. Wetherspoon, like our peers, will be working closely with all parties, including employees, banks, landlords and suppliers, in order to emerge from the situation in the best shape.” The government has accelerated measures to contain the virus this week, telling individuals to avoid social gatherings and non-essential travel, which has put significant strain on the hospitality sector. Shares in JD Wetherspoon plc (LON:JDW) were up on Friday, trading at +31.56% as of 12:59 GMT.

Marks and Spencer Group plc (LON:MKS) issued a warning on Friday concerning the business impacts related to the evolving COVID-19 outbreak. Shares in the British retailer were down during trading on Friday. Marks and Spencer warned that trading over the next 9-12 months in its clothing and home and international business will be “severely impacted” by the illness. “As a result, it is not possible to provide meaningful guidance on future earnings, although we are taking every step to secure future value for shareholders, colleagues, and suppliers,” the retailer continued. The company’s food business has remained strong so far, and it is expected to trade profitably throughout. However, Marks and Spencer added that it is not benefitting from stockpiling as much as other major grocers are. Marks and Spencer said that the final result of profit before tax could be at or below the bottom end of the £440 million to £460 million range, as trading in clothing and home is likely to be “very depressed”. “We are preparing for the contingency that some stores may have to close temporarily,” warned the retailer. Marks and Spencer said: “M&S has served customers without cease through two world wars, terrorist bombings and numerous local disasters and we are determined to support our customers now as we always do.” “We have one of the most loyal and committed workforces in retailing and are very grateful for the extraordinary cheerfulness and dedication they are showing in difficult times. We are seeing substantial sales declines in Clothing and Home and we have to manage our costs accordingly but expect to be able to redeploy significant numbers of colleagues to support the Food business,” it continued. Shares in Marks and Spencer Group plc (LON:MKS) were down on Friday, trading at -0.60% as of 11:51 GMT.

Next plc (LON:NXT) warned on Thursday that the “greatest challenge” it faces concerning the evolving COVID-19 outbreak is the risk it poses to demand. The company said that it must prepare for a “significant downturn” in sales as the situation continues to develop. Shares in Next rose by over 10% on Thursday. The company did see total group sales for the year ending January 2020 rise by 3.3% to £4.36 billion, with group profit ahead of its guidance at £728.5 million. However, Next is unable to predict the extent that COVID-19 will hit its retail and online sales looking ahead. Though the virus is likely to impact its operations, Next does not expect this to be as damaging as the “very significant drop” in both retail and online sales. “Online sales are likely to fare better than Retail but will also suffer significant losses. People do not buy a new outfit to stay at home,” read the Chief Executive’s review. Indeed, as the government accelerates its measures to contain the spread of the illness, people are being advised to stay at home and avoid all non-essential travel. “We have included a detailed stress test that gives the likely cash and profit impact for different levels of sales decline,” the Chief Executive’s review continued. “The conclusion of our stress test is that the business could comfortably sustain the loss of more than £1bn (25%) of annual full price sales, without exceeding our current bond and bank facilities. This accounts for the business rates holiday announced by Government but excludes any use of Government lending or any measures that may be introduced to help with wages during closure.” Elsewhere in retail, Laura Ashley (LON:ALY) collapsed earlier this week as the COVID-19 outbreak immediately hit trading. Shares in Next plc (LON:NXT) were up on Thursday, trading at +10.05% as of 11:11 GMT.

Burberry Group plc (LON:BRBY) saw its shares fall on Thursday after the luxury fashion brand updated the market on COVID-19 related business impacts. Shares in the company were down by over 3% during Thursday morning trade. Burberry said that trading has “deteriorated significantly” since 24 January. Over the last six weeks, the company has seen comparable retail store sales decline between 40% to 50%. In February, sales losses were predominantly recorded in Burberry’s Asian markets. Currently, over 60% of Burberry stores in Europe, the Middle East and Africa and roughly 85% of stores in the Americas are closed. Those which remain open are operating with reduced hours and experiencing very weak footfall, the luxury fashion brand said. During a time when people are being encouraged to stay indoors and self-isolate, it is not wonder footfall has reduced. Burberry said that, in total, roughly 40% of its directly operated stores across the world are closed, with further closures expected. Burberry continued to add that comparable retail store sales in the final weeks of its financial year are expected to decline by 70% to 80%. Many companies have been hit by the evolving COVID-19 outbreak as governments are restricting non-essential travel in order to contain the illness. “Since our February update, the material negative effect of COVID-19 on luxury demand has intensified and is now impacting the industry in all regions,” Marco Gobbetti, Chief Executive Officer, commented. “Our primary concern is the global health emergency and we continue to take every precaution to help prevent the spread of the virus and ensure the safety and wellbeing of our employees, partners and customers,” said the Chief Executive Officer. “We are implementing mitigating actions to contain our costs and protect our financial position, underpinned by our strong balance sheet. We remain confident in our strategy and the strength of our brand and I am exceptionally proud of our teams’ resilience and commitment.” Shares in Burberry Group plc (LON:BRBY) were down on Thursday, trading at -3.26% as of 09:58 GMT.

Lloyds shares (LON:LLOY) are not alone in experiencing sharp declines due to the coronavirus COVID-19 pandemic and investors will be accessing a number of shares now ‘on sale’. The Lloyds share price has dropped a significantly since the beginning of 2020 with shares down over 40% from the start of 2020 to the middle of March. The drop is inextricably linked to the spread of coronavirus, and the market scrambling to price in the decline in economic activity. However, historical analysis of shares and markets during periods of panic highlights that in almost all circumstances going back to the Great Depression, shares overreact to the downside during the onset of negative news, before recovering towards prior valuation averages.

Lloyds share price

Lloyds share price as shares are currently trading at just 9.6X historical earnings. This compares to a long term FTSE 100 average of around 17x. Value investors would argue the low PE Ratio signals a buying opportunity, but this doesn’t reflect the drop in earnings in 2020, which cause earnings ratios to increase for 2020 FY. This won’t be a surprise to the markets, however, and investors will eventually look past COVID-19, just as they looked past PPI payments and the restructuring costs caused by the financial crisis.

Economic fears

Lloyds’ profitability is directly linked to the strength of economy and borrowing demand by business and companies, which is collapsing as coronavirus fears cause panic among consumers and the government restricts everyday activities. Notwithstanding the economic pain driving downside in Lloyds, this pain is deemed necessary by governments to help combat the spread of coronavirus. Further volatility in shares should be expected as we move towards a peak in new COVID-19 cases and restriction on populations are increased. “We know you have to hurt the economy to stop the virus. But the damage is probably going to be temporary, and we’re going to see a recovery probably in the back half of this year,” said Art Hogan, Chief Market Strategist at National Securities in an interview with CNBC. As well as relying in strong economic activity for sustained profitability, Lloyds is also a facilitator of economic activity. The UK government have said they stand ready to support the economy and have introduced the most significant package of financial support measures made by a peacetime government. Through the new Coronavirus Business Interruption Scheme, the UK government will underwrite risky loans to business made by banks such as Lloyds. This will provide support for Lloyds’ underlying lending business as they offering payment holidays for personal loans and mortgages. These measures will avert the worst case scenario for banks and investors should note we are facing a medical crisis as opposed to a financial crisis similar to 2008. Banks such as Lloyds are structurally sound but profitability is set to be dented for a quarter or two. This will be temporary, and just as the economic slowdown was quickly priced into the Lloyd share price, markets will react with buying on any positivity in the battle against COVID-19.