Immediate consideration was potential supply chain disruption and exposure to China, but other key centres like South Korea and Cambodia are seeing an increasing number of COVID-19 cases. Retailers are reporting that factories in China have restarted production but at reduced capacity. Most have said that they have enough stock to see them through Easter and into early summer, so the longer the production delays continue, the more likely there may be some availability issues from late summer/autumn. The flipside may be less surplus stock and less discounting. Few retailers have direct exposure in mainland China though WH Smith and Watches of Switzerland have exposure to Chinese tourists. WOSG reported last week that demand continues to exceed supply and reiterated its guidance to year-end April 2020. SMWH has little Asian exposure. Attention has now switched to demand weakness and the potential economic/social impact as the virus has reached Europe. When demand falls, the most vulnerable companies tend to be those with high levels of debt, low margins and inflexible fixed costs. The retailers in our universe we would consider to be more vulnerable are low-margin players such as Superdry, Dixons Carphone and ASOS. Retail share prices have corrected sharply. We believe it is too early to adjust forecasts for any potential impact from COVID-19 given the fluid nature of the situation. The sector is down 14.4% YTD versus the market down 12.5%. If you believe that COVID-19 will have a short-term impact like SARS, then share prices are already discounting material downgrades which we believe should not impact long-term equity stories. SMWH & B&M seem to us to have been disproportionately sold off given events to date. SMWH has some protection from its High Street/UK Rail and hospitals business which we estimate accounts for c.45% of FY21E group sales. B&M has some protection from having a defensive grocery/FMCG business (c.45% of sales), weaker comps ahead and balance sheet strength backed by the forthcoming DC sale & leaseback deal. The best way to make money in Retail over the longer term has consistently been roll-out stories, whether physical or online, as they are less reliant on the underlying consumer. Events like this can present a great buying opportunity. We highlight B&M, Greggs, JD Sports, WH Smith and Watches of Switzerland as our preferred BUYs. Our value picks are Next, Halfords and TheWorks.co.uk. We have SELL ratings on Kingfisher, Marks & Spencer and Superdry.