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Highlights
- The FTSE 100 is set to open around 12 points higher.
- November retail sales show a significant year-on-year decline, largely due to the timing of Black Friday.
- Corporate updates include positive results from SSP and a major acquisition by Derwent London.
London’s stock market is expected to open higher on Tuesday as investors digest the latest UK retail sales data, which revealed a sharp decline in sales for November. The FTSE 100 index is projected to rise by around 12 points at the opening bell, despite the challenging figures for the retail sector.
Retail sales in November saw a significant drop of 3.3% year-on-year, a result of the later timing of Black Friday this year, which fell outside of the reporting period. The BRC-KPMG retail sales monitor, covering the four weeks from October 27 to November 23, showed that total retail sales were significantly lower than the three-month average of -0.1% and the 12-month average of 0.5%.
Helen Dickinson, CEO of the British Retail Consortium, noted that the poor performance was mainly driven by the shifting timing of Black Friday. However, the broader trends, including weak consumer confidence and rising energy bills, contributed to the decline in non-food spending. Fashion sales, in particular, underperformed as consumers delayed purchasing winter clothing, while health-related spending saw a boost due to seasonal illnesses.
Food sales offered a rare positive, rising by 2.4% year-on-year over the three months to November, although this still fell short of the 12-month average growth of 3.7%. In contrast, non-food sales continued their downward trajectory, dropping by 2.1% year-on-year, a slight improvement from the 12-month average decline of 2.2%.
Online sales of non-food items were hit the hardest, plummeting by 10.3% in November, far worse than both the three-month and 12-month average declines of 1.7% and 1.5%, respectively. Despite this, the online penetration rate for non-food items remained relatively high at 40.6%, compared to 41.4% in November 2023.
Retailers are hoping that consumer spending will be delayed, rather than diminished, in the run-up to Christmas. However, if this seasonal spending does not materialize, retailers will face additional financial pressures, with rising costs projected for next year due to new packaging levies and other regulatory changes. The government's handling of these cost increases will play a critical role in determining future price rises and potential job losses in the sector.
In corporate news, several notable developments have emerged. Upper Crust and Ritazza owner SSP reported a strong performance in North America, the UK, and the APAC & EEME regions, helping to offset a weaker showing in Continental Europe. In the year to September 30, SSP's earnings before interest, tax, depreciation, and amortization (EBITDA) rose by 23%, with revenue increasing by 17%.
HgCapital Trust also announced the sale of its investment in Dext Software, a bookkeeping automation platform, to Iris Software Group. The transaction, valued at £32.7 million, represents a 13% uplift from its last reported valuation and will contribute to a pro-forma net asset value of £2.4 billion.
In property news, Derwent London acquired the remaining 50% stake in the 50 Baker Street W1 development for £44.4 million. This acquisition is part of the company’s strategy to enhance its portfolio, as detailed design work is underway for the planned 240,000-square-foot office-led project. The acquisition follows successful pre-letting at the adjacent 25 Baker Street development.
As investors prepare for the market open, all eyes will be on the retail sector, with the hope that the upcoming holiday season will offer a much-needed boost for retailers. However, challenges such as shifting shopping habits and rising costs will remain critical factors influencing the sector's performance in the months ahead.
