Many retail goods ‘likely to go away permanently’ post coronavirus, says investor Glenn Hutchins

J. Crew on Monday became the first national U.S. retailer to file for bankruptcy amid the coronavirus outbreak, and Neiman Marcus isn’t far behind, according to a Bloomberg report. Meanwhile, sales at e-commerce giant Amazon (AMZN) have surged while many Americans remain stuck at home.

Not only will more retail chains go out of business but also the sector as we know it will not survive, said billionaire fintech investor Glenn Hutchins in an episode of “Yahoo Finance Presents” on Monday.

“Physical retail was in the last stages of its decline,” he says. “Many of these retailers are going to be toppled over as a consequence of this crisis.”

“The kind of ways they provided their goods — and the goods they provided — are likely just to go away permanently,” adds Hutchins, co-founder of Silver Lake Partners and former special advisor to President Bill Clinton on economic and health-care policy.

Billionaire fintech investor Glenn Hutchins appears on “Yahoo Finance Presents.”

He said some industries, like airlines, will return “very, very slowly” as Americans eventually regain their comfort with leisure travel. But brick-and-mortar retail will not survive this shift in consumer habits.

“There’ll be some things that will completely go away,” he says.

Retails sales dropped a record 8.7% in March, though in many states non-essential businesses remained open until the latter part of the month — so the decline in April could very well be even worse.

Amazon, however, bucked the trend, as Yahoo Finance’s Heidi Chung reported, netting revenue of $75.5 billion for the first quarter of 2020, a leap of 26% over the same three-month period last year. The spike is likely attributable to the reliance on e-commerce as Americans order from home.

The trend is backed by earnings released in late April by Target (TGT), which showed that digital sales to-date in that month had surged 275% while store sales had plunged at a high-teens percentage, as Yahoo Finance’s Brian Sozzi reported.

Hutchins is part owner of the Boston Celtics and a co-chair of the board at the Brookings Institution, where he helped build the Hutchins Center on Fiscal and Monetary Policy, with which former Fed chairs Ben Bernanke and Janet Yellen are affiliated. 

In 1999, he co-founded private equity firm Silver Lake partners. The company has about $40 billion under management, with investments in Airbnb, Dell (DELL), Alibaba (BABA), and other major tech firms.

‘A healthcare crisis that is driving economic problems’

Hutchins acknowledged that the exact duration and impact of the economic challenges are difficult to predict since they stem from a public health issue.

“We have to remember that this is primarily a healthcare crisis that is driving economic problems,” he says.

“So we really can’t, I don’t think, have a very good view about where you go with the economy until you have a sense of the resolution of the healthcare issue,” he adds.

He said eventually the U.S. economy will regain the strength it displayed before the crisis.

“I’m thoroughly convinced that sometime, let’s call it at least at most two years from now, we will have had the right kind of capacity built to be able to live a normal life,” he says.

“There’s a huge amount of uncertainty about what happens between now and then,” he adds.

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