Possible to know in advance what retail companies will be market leaders and laggards on the basis of digital transformation

Summary

As retail has been disrupted nearly as much as any sector in the wake of COVID‑19, there are some clear lessons learned on how the landscape has dramatically shifted. Companies that were executing well on digital strategies have outperformed while those that weren’t have not only underperformed but many are no longer in business.

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Analysis

Beyond anecdotal stories, the strong outperformance of the Cyberhedge indices since COVID-19 offer proof within not only the retail sector but all sectors that executing well on digital transformation is the difference between leading and lagging.

As we have highlighted, the companies that have been hit hardest since the pandemic and have underperformed the most are those that were not executing well on a digital strategy prior to the lockdowns and also tended to have weaker financials—fewer financial reserves, higher leverage, and too much over-financial optimization. The dangers of too much financial optimization are among the factors that led to the downfall of J. Crew and Neiman Marcus.

All retailers recognize the need to accelerate digital efforts but only some are doing it well. Levi’s is an example of a traditional bricks-and-mortar retailer that recognizes the need to rebalance its own bricks-and-mortar store and digital growth. CEO Chip Bergh announced an acceleration of digital transformation plans as it seeks to recover from a steep YoY drop in revenues in Q2.

It is also possible to know in advance what retail companies are more likely to succeed and fail on the basis of good and bad digital transformation. Investors can look at how well or poorly companies are doing in an objective, independent and market-validated way through Cyberhedge ratings.

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Denis Bolshakov

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These first ever benchmarks prove good cyber governance matters to shareholder value. They measure stock market performance of companies with good and with bad cyber governance scores. Scores are based on Cyberhedge’s proprietary cyber governance rating methodology. Market performance is tracked by an independent firm. The results show that companies with good cyber governance outperform their peers in US, UK, and EU markets.

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