January 16, 2018

Pegler’s market report – 16.01.18: More news from the high-street

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (16.01.18) Business section under the title Pegler’s Market Report:

More news from the high-street

Retail sales increased marginally in December, while online sales climbed 7.6%, according to the British Retail Consortium (BRC). But while food sales were up 2.6% over the three months to December, in-store sales of non-food items declined 4.4%, their biggest fall for five years.

With inflation outpacing income growth, industry analysts believed shoppers saw more of their spending power absorbed by essential items, including food, leaving less left over for buying Christmas gifts.

As always there are the high-street winners and losers – struggling fashion retailer New Look is now working with advisers at Deloitte on its plans to shut around 60 UK shops. The fashion chain is in the middle of a turnaround plan after bringing back its old management to revive the business following a steep fall in sales and mounting losses.

At the other end of the spectrum, Fortnum & Mason, the 310-year-old upmarket grocer that counts the Royals as regular customers, has toasted a rise in festive sales on the back of a record number of domestic shoppers. The business posted a 13pc rise in like-for-like sales over the five weeks to December, with 77pc of all sales at its famous Piccadilly store being driven by UK shoppers. Online sales were also 23pc higher than last year.

Elsewhere Marks & Spencer and Tesco disappointed the market whilst WM Morrisons fared better.

House price growth slowed to 2.7% last year, with home values held back by the squeeze on wage growth and continuing economic uncertainty, according to Halifax. The average UK house price ended 2017 just above £225,000. Halifax expects price growth of between 0% and 3% this year.

However, the recent reforms to stamp duty for first-time buyers and further reductions in the number of existing homes coming on to the market should ensure that prices at least stabilise, rather than fall outright, in 2018.

The pound leapt to its highest level against the dollar since the EU referendum as renewed Brexit optimism swept across currency markets. Sterling gained after reports emerged that Spain and the Netherlands will look to strike a soft Brexit deal. Its climb was also aided by softening rhetoric from EU leaders and the dollar continuing to be put under pressure by sluggish inflation data.

It’s looking very grim for troubled outsourcer Carillion. Its shares dived yet again amid reports that the firm is lining up an administrator in case its rescue deal collapses, and that the UK government is making contingency plans for projects it is contracted on. It was worth £1bn less than a year ago. Now it’s worth just £70m.

In other corporate news there was an opportunistic takeover bid from investment firm Melrose Industries for engineering giant GKN with an attempt to break-up its automotive and aerospace divisions.

By David Pegler, Brighton Capital Management