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January 23, 2018

Pegler’s market report – 23.01.18: Worst Christmas sales growth in five years


in Insights Press Releases

As published in the Brighton Argus (23.01.18) Business section under the title Pegler’s Market Report:

Worst Christmas sales growth in five years

The woes on the high street over the Christmas period has topped off a miserable year for the retail sector and one littered with profit warnings and sales slumps. As previously highlighted the gap between inflation and wage growth has hit household incomes and shoppers are either staying away from the high street or hunting for cheaper deals, primarily online.

Even selling goods at bargain prices does not make a retailer immune from tumbling retail sales, as evidenced by recent lower sales growth numbers from Primark. Womenswear chain Bonmarché also reported poor numbers – strong online sales growth of 28.5pc failed to offset the poor performance of its stores, resulting in an overall fall in like-for-like sales of 6.9pc.

Carpetright’s profit warning has sent shockwaves through the furniture and homewear sector with investors spooked by shoppers shunning big ticket items. Its value has plunged from £910m in 2007 to just £65m today.

Bricks-and-mortar stores are also battling a huge shift in the sector as they struggle to adapt to shoppers increasingly turning to online shopping.

Some industry commentators believe that consumers continue to bring forward purchases for Black Friday promotions so we are witnessing higher spending in November than December.

Commenting on the weak retail sales data, a former member of the Bank of England’s Monetary Policy Committee said “weak consumer spending will continue to be a drag on the UK economy in 2018, but the prospects are brighter for 2019 and beyond – as long as we get a reasonable Brexit deal with the other EU-27 countries”.

Turning to more upbeat news there was speculation that consumer goods giant Unilever is set to swoop for rising star Fevertree Drinks, which caused the upmarket tonic water maker’s shares to fizz on London’s junior market. With Fevertree increasingly relying on distribution deals outside of the UK, its growth could be catapulted by Unilever’s wide reach, and synergy savings that could be created by a tie-up. Drinks giants Diageo and Pernod Ricard were also rumoured to be in the hunt for the company as a perfect tonic to their alcoholic drinks ranges, but the Aim-listed company’s collaborations with a wide array of drink manufacturers could prove a stumbling block to a bid.

Bitcoin had a bit of a recovery bounce after it shed as much as 34pc. of its value on fears of a likely regulatory crackdown. China, Russia and South Korea are all apparently preparing to clampdown on cryptocurrency trading.

In other news, the market value of Dignity, one of Britain’s biggest funeral providers, has halved after the company warned that it would have to cut its prices this year as a result of intense competition.

Finally, local engineering consultancy Ricardo, which has its headquarters in Shoreham-by-Sea, was certainly one of the bright sparks of the week, after reporting a 30pc rise in orders.

By David Pegler, Brighton Capital Management

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