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September 4, 2015
While UK Index Miners continue to have a rough time of it due to supply glut fears and a more pronounced China slowdown the equally loved Retail Sector today showed it wasn’t immune to trouble with the likes of Next (NXT), SuperGroup (SGP), Dixons Carphone (DC.) and Burberry (BRBY) all giving up around 3% to underperform their blue-chip peers. This follows overnight data from sales tracker BDO showing August was the worst month for the British high street since Nov 2008 when markets were in full global financial crisis mode. UK retail sales -4.3% year-on-year means contraction for a fourth consecutive month, something we haven’t seen since 2009 for the May-September period.
Blame is being pinned on British consumers staying at home rather than making the tills ring in-store due to wetter and colder than average summer weather, concerns about higher interest rates next year, more spending on leisure activities and holidaymakers profiting from a stronger pound (notably versus the euro) to reverse an austerity-driven trend for staycations towards more traditional foreign destinations (tourists to the UK also spending less as a result of sterling strength). The travel argument is backed up by solid updates from easyJet (EZJ), Int. Cons. Airlines (IAG), Ryanair (RYA) and Wizz Air (WIZZ) which as a group announced passenger numbers up between 7-19% last month and saw EZJ raise full-year profits guidance.
Despite the sell-off, little solace was sought from comments by BDO’s Head of Retail that poor weather in late August resulted in more expensive Autumn/Winter garment purchases being brought forward. Could continued grey skies generate a shopping spree this month as hopes fade of that traditional Indian Summer and we are reminded of the need for that new coat before the clocks change and Winter’s arrival is sealed? Could a contrasting bumper September update from BDO bring about an October rebound for the retail sector? Might there be the opportunity to bag a pre-season bargain ahead of the crowds?
Mike van Dulken, Head of Research
*Source: AlphaTerminal, Prices intraday 4 Sept 2015
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
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