Global Real Estate Strategy – Screening for value amid the sell off
COVID-19 impact relatively low: Focused on necessities; small commercial areas
Convenience stores sell necessities, mostly foods, and serve small commercial areas. While some stores near office buildings and train stations are suffering, many others in residential areas, along with supermarkets and drugstores, appear to be working as outlets serving stay-at-home related demand. Such government economic policies as promoting point rewards for cashless transactions may provide support too.
Franchising issues remain, but friction with franchisees is bottoming
In 2019, labour shortages and cost increases at franchise stores became social issues, along with burdens associated with 24-hour operation. In response, the major chains have slowed net new store openings and boosted support for franchises. Excessive competition has eased, and friction between companies and franchisees is bottoming. We think the convenience store business model is sustainable. We continue to expect drugstores sales to grow 3% a year.