Is UK’s Retail Scenario In Doldrums?

  • Jan 24, 2019 GMT
  • Team Kalkine
Is UK’s Retail Scenario In Doldrums?

UK retail sector in 2018 saw a tumultuous performance; as industry saw a muted demand and cost pressures in 2018. But in the second half of 2018, consumers curtailed big-ticket purchases and routed their spending to non-discretionary areas and online shopping. But consumers are still spending, and retailers have to understand the spending preferences and capitalize on the same. As per the ONS (Office for National Statistics), all sectors excluding motor fuel stations and food experienced contraction during the festive month. In 2018, the retail industry reported a growth of 2.7 %, from their peak of 4.7% two years before.

The festive trading season was a roller coaster for the retail sector, with some players managing to do well in their sale, while rest failed to achieve the target. The industry experienced worst Christmas sales growth in the last 20 years as they rushed to stockpile products in the wake of uncertainty over no-deal Brexit in March 2019, which is extremely unpredictable. Lately, we have seen that M&S and Debenhams are focusing on internet sales which generally contribute around 30 percent to their total sales. At present, internet sale accounted for 22 percent for M&S, and 18 percent for Debenhams while none of them reported stellar growth in their online sales growth over Christmas trading season. Debenhams managed to report only 6 percent growth in online sales over this festive season.

While many retailers are facing tough market conditions, Grocery retailers are reporting stellar growth despite uncertainties around Brexit, volatile pound and inflationary environment. Pure play online player “Nimble” continued to capture its market share, on the other hand. Amidst this, a bunch of analysts also argued that shoppers still prefer going to shops instead of online platforms.

According to the research report released by consultancy firm KPMG, Britain retail industry will remain in a mess regardless of Brexit outcome. One can say that it is too easy to point fingers at Brexit related scenario for every mess which is going on in the UK market, however, there might be something beyond what it looks at face value.

For example, recently Marks & Spencer and Tesco stockpiled packets and tinned food as chances of no-deal Brexit is very high, that could lead to major delays in ports. Also, the Entertainer stockpiled toys to ensure zero seasons during the summer season.

For companies like Lidl and Aldi, premium food range is the key to entice the mid-income shoppers. Premium  foods are one of the ways for Supermarkets to increase sales when volume growth is reluctant. On Christmas families splurge on these treats.

Similarly, investing on technologies like Heat Maps etc., the retail stores could take the store experience to next level, which could never be matched by online format.

UK’s retail sector remains the largest private sector employer in the country, 1 out of every 10 people is working in retail sector. Despite of a bad season, the total annual sales reported over 350 billion pounds.

Tesco, Sainsbury, Asda, and Morrison are the dominant players in UK’s retail sector. Although Amazon has taken significant market share in the UK’s retail segment, and now accounts for 4 pounds in every 100 pounds spent in the UK. It is worth looking at how this retail landscape will evolve.

With Bank of England reducing the interest rates to a historic low level, the spotlight is back on diverse investment opportunities. 

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