UK retailers to enjoy strong trading for months to come, analysts say
Trading for UK retailers is expected to build well into the weekend and develop into a very strong summer, according to analysts.
Shoppers flocked to stores across the country on Monday, when non-essential retailers were allowed to restart trading after nearly 100 days of lockdown, with many people queuing despite the bad weather.
Royal funeral aside, it is forecast to be a busy week with significant pent-up demand, Peel Hunt said, as UK residents are keen to leave their homes after months of severe restrictions.
“We are confident that the fashion and home sub-sectors will do well when things get really going again. Shoppers haven’t had any events to dress up for in nearly two years now, so even a meal outside a pub may be cause for a new outfit,” analysts at Peel Hunt said.
In fact, occasionwear designer Quiz PLC (LON:QUIZ) was higher on Tuesday despite posting a 66% plunge in full-year revenues to £39.7mln.
Chief executive Tarak Ramzan said in a release “there is robust underlying demand” for the brand, which is “well-placed” to benefit from the easing of restrictions.
The news came alongside JD Sports Fashion PLC’s (LON:JD.) preliminary results, which forecast £475-500mln profits for the year to January 2022 as it continues to expand internationally.
The FTSE 100 athleisure retailer reopened stores in England and Wales on Monday but did not provide any commentary, despite reports of queues outside of its Oxford Street site in London.
“JD Sports is one of those stocks that proves it is wise to invest in retail, as long as you pick the right ones. Like its cousin Next (LON:NXT), JD has enjoyed a stellar recovery over the past year,” Chris Beauchamp at IG said.
Investors are hoping to gain exposure to UK consumer spending through JD Sports and Next, analysts commented, which is expected to spike amid the vaccine rollout and the easing of restrictions.
The BRC-KPMG Retail Sales Monitor revealed a 13.9% growth in total sales in March, from 1% in February, although it covers the five weeks to April 3, which includes the week in the run-up to Easter Sunday, when food spending usually jumps.
“We expect retail sales to rebound following yesterday’s reopening of non-essential shops, and expect total sales to surpass October’s peak in May… But once pent-up demand has been released, we think that the recovery in retail sales will fall flat,” economists at Pantheon Macroeconomics commented.
“Wages likely will not keep up with CPI inflation over the next 12 months, and more job losses will crystallise when the furlough scheme finally is wound down in September. Government policies, such as the four-year freeze on income tax thresholds that begins next year and the planned withdrawal of the £20 per week uplift to Universal Credit in September, also will undermine households’ real incomes. Accordingly, we think sales volumes will be only about 3% above their 2019 level this year as a whole.”