Tiger Group’s valuation services division issued risk assessment guidance for asset-based lenders on 29 consumer goods categories based on disruption from the COVID-19 pandemic.
Among the 29 categories analyzed in a study posted on the asset appraisal, disposition and financial service’s firm’s website, three (10.3%) were rated high risk, 22 (75.9%) were deemed moderate risk and four (13.8% ) were classified as low risk. Fashion apparel, fashion accessories and footwear were rated as the riskiest of the categories, while food and beverage, pharma, spirits and firearms had the lowest risk.
“For the past several decades, the asset-based lending community has become extremely adept at pricing assets, such that liquidators can predict the outcome of a liquidation with a high degree of certainty,” Ryan Davis, managing director of Tiger Valuation Services, said. “However, COVID-19 has caused governments, businesses and citizens to take unprecedented actions globally. Until most businesses reopen and assets are again traded openly in the market, asset prices will vary significantly. Still, the economic forces that impact asset pricing are known, so we can reasonably predict which categories will be impacted most and when we can expect values to stabilize.”
Total risk in each category was based on a scale of zero to 15, with 15 equating to the highest risk. Tiger’s methodology weighed three factors: whether demand is subject to changes in discretionary income, whether the goods are seasonal in nature and the extent to which the category’s supply chain has been disrupted. Each of those factors was assigned a rating of zero to five to arrive at the total score.
Fashion apparel’s total risk factor of 14 reflected scores of five for highly discretionary goods, four for significant supply chain disruptions and five for highly seasonal goods.
“In all, we look for a significant decline in asset values and projected stabilization in spring 2021 for this category,” Davis said.
Fashion accessories and footwear were close behind, each with total scores of 12 and stabilization not anticipated until spring 2021.
At the other end of the spectrum, food and beverage, pharma and spirits each had a total risk rating of four, which reflected scores of one as non-discretionary seasonal staples, two for a mostly stable supply chain and one for goods being non-seasonal. Overall, each category’s values were viewed as stable, with projected full stabilization by summer 2020. Firearms were close behind, with a total risk rating of five.
Moderate risk categories were led by automotive parts, building materials, cell phones, lumber and pulp, and office supplies, with all having a total risk rating of six. These categories were followed by books/music/movies, computers, electronics, fabrics, metals, pet supplies, resins, and tools/hardware, each with a rating of seven. Scores of eight were assigned to appliances, housewares, musical instruments, nursery, sporting goods and toys. The moderate risk categories were rounded out by fine jewelry, furniture, and health and beauty, each with a rating of nine.
