The high street promises to look very different after Covid-19, whether your memories tend towards 1980s nostalgia (pestering your parents in Woolworths for pick‘n’mix), the 1990s boom in fast fashion (mooching through TopShop on a Saturday afternoon) or the ailing state of the average town centre in recent years.

The retail and hospitality sectors have suffered most severely as a result of the coronavirus, with the UK’s latest national lockdown creating the prospect of more redundancies to add to the combined 439,000 jobs lost in these sectors so far – but with a vaccination programme well under way and the easing of further restrictions just around the corner, we wanted to offer some light relief.

So, forget fantasy football: this is our fantasy high street. We looked at a range of fictional businesses – from Underworld Textiles, the underwear factory on Coronation Street, to The Devil Wears Prada’s Runway magazine – to assess how they would cope with the crisis and adapt their products for a post-Covid world. Will the outcome be boom, bust… or a BOOST&Co loan?

 

The Devil Wears Prada: Runway magazine

Leading fashion magazine Runway was facing serious challenges even before Covid-19, with market forces beginning to militate against the industry: growing global awareness of the climate crisis has prompted a slow but inexorable shift towards sustainability, with a significant chunk of customers no longer prepared to countenance the environmental and human costs of the fast-fashion model.

As a high-end publication with a relatively wealthy readership, Runway enjoys more protection than most from the long-term decline in print advertising, but it is yet to diversify sufficiently for the digital age. Attempts to back up its physical product with a strong online presence have been hampered by an old-fashioned, tyrannical chief executive who remains reluctant to move with the times.

BOOST&Co says: “We’re proud to fund firms that focus on sustainability, such as the award-winning fashion rental specialist ACS Clothing, and we hope that Runway can use its influence in the industry to drive change. However, instilling a positive company culture is key to BOOST&Co, and this is one area in which the magazine continues to drag its feet, so this opportunity is not a good fit for us.”

Marvel: Stark Industries

Stark Industries, founded by Isaac Stark in the 19th century and now run by Pepper Potts following the death of his grandson, Tony Stark, had ample cash reserves to cope with Covid-19. The company has profitable subsidiaries and boasts a list of blue-chip customers: it builds the helicarriers used by S.H.I.E.L.D., produces Quinjets for the Avengers and makes armour for Iron Man and War Machine.

The business has fended off hostile-takeover attempts and has diversified in recent years, expanding from its Los Angeles base to establish a strong presence in traditionally tech-savvy Japan, but the pandemic has forced many of its clients to temporarily pause their work. However, conflict in northern Ethiopia and increasing instability in the Middle East may provide new opportunities for sales.

BOOST&Co says: “We would not fund a weapons manufacturer, because we are a signatory of the United Nations’ Principles for Responsible Investment and have always had a strongly ethical approach to our work. However, Stark Industries has shown impressive resilience since it mysteriously lost 50% of its workforce in 2018, so we believe the firm is well placed to continue to grow.”

Coronation Street: Underworld Textiles

Underworld’s chequered past – including mass redundancies in 2011, a former owner gambling with the factory’s profits in 2015 and near-bankruptcy in 2017 – left the business ill-equipped to cope with Covid-19. The company’s major strength is its tight-knit team of loyal employees, but many have been furloughed thanks to a lack of cash, so production has dropped, along with demand.

Like the disused former cotton mills close to the factory’s site in Weatherfield, a “left-behind” northern town, Underworld is on the path to obsolescence. This downward trajectory has been accelerated by its controversial chief executive, Gary Windass, who has not invested in new technology and has failed to diversify (for example, by redeploying staff to make PPE during the pandemic).

BOOST&Co says: “We always work closely with the management teams of the companies we fund, but Underworld’s chief executive does not display any of the leadership styles that contribute to a healthy, growing firm. We would not invest, particularly as the business has not learned from its previous problems with cash flow. It has not moved with the times and has little opportunity to scale.”

Harry Potter: Leaky Cauldron

The Leaky Cauldron, renowned worldwide as the place for magical mingling, suffered more seriously than many muggle hospitality businesses during Covid-19. Hogwarts School for Witchcraft and Wizardry reopened in September, so the famous pub in Diagon Alley benefited from an increase in the number of visitors to the area, but capacity was reduced to allow for social distancing and another lockdown soon followed.

Business is likely to flourish when things return to normal, but owner and landlady Hannah Abbott is carrying significant personal debt after taking a loan from Gringotts to cover running costs and wages. The pub was unable to furlough employees, because it falls under the jurisdiction of the Ministry of Magic and is therefore ineligible for the UK government’s support schemes.

BOOST&Co says: “Although The Leaky Cauldron is a great example of a business that could have benefited from short-term support, such as a Bounce Back Loan, the family-run firm offers limited opportunity to scale. We prefer to invest in companies that can demonstrate strong recurring revenue – such as businesses operating in the SaaS sector – and a genuine desire for growth.”

Peaky Blinders: Shelby Company

Switching from distilling gin to hand sanitiser was a smart move early in the coronavirus crisis, providing some much-needed positive PR to distract from Shelby Company’s reputation for “dirty dealings”. The decision to discontinue its automotive manufacturing seems wise, too, with the UK’s exit from the European Union posing a threat to the country’s success in this sector.

Historically, the business has been supported by a strong property portfolio, but with the commercial sector struggling, it has less cash in the bank to invest in the ongoing digitalisation and diversification of its manufacturing operations. A growth loan could be a good opportunity for Shelby to invest in R&D, also providing some breathing room in the form of working capital over the coming months.

BOOST&Co says: “The firm’s new management team has proved that it is able to make swift decisions, and its treatment of its employees in 2020 showed that Shelby’s culture has significantly improved. As part of our commitment to responsible investing, BOOST&Co does not fund organisations involved in alcohol or gambling, but this could be a lucrative opportunity for a different alternative lender.”

Toy Story: Al’s Toy Barn

While many independent retailers suffered a substantial blow to sales during the Covid-19 lockdowns, Al’s Toy Barn managed to set up a rudimentary website to operate a “click and collect” service. The firm benefited from the unprecedented demand for items such as bicycles, paddling pools and large outdoor toys, and a historic supply error meant that it gained extremely high levels of surplus stock.

This has placed the shop in a fairly stable position, enabling it to take advantage of both customer demand and its rivals’ lengthy delivery times. However, this is a result of luck rather than judgement, so Al McWhiggin would need to demonstrate long-term plans for growth or expansion, or a source of reliable recurring revenue, to make the store a viable investment opportunity.

BOOST&Co says: “Toy shops with high rents and large footprints face many challenges, from a lack of visitors making impulse purchases to a backlog of merchandise associated with films whose release dates have been pushed back. McWhiggin is more interested in the niche collectibles market, so the Toy Barn might make a better acquisition opportunity for another business owner.”

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