BRBY, SBRY, FRAS: Stocks to watch amid shrinking consumer spending

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BRBY, SBRY, FRAS: Stocks to watch amid shrinking consumer spending

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 BRBY, SBRY, FRAS: Stocks to watch amid shrinking consumer spending
Image source: Stokkete, Shutterstock

Highlights

  • With inflation skyrocketing to decades-highs, around 86% of people are now preferring to plan ahead in order to reduce their discretionary spending.
  • According to a report by Grant Thornton and Retail Economics, the UK households, on an average are set to reduce their discretionary spending by £887 through April 2023.

With inflation soaring to the highest level in the last four decades, people are cutting down on non-essential items to manage their expenses. According to a joint report released by Grant Thornton and Retail Economics, around 86% of people intend to reduce their discretionary spending over the year. This will wipe out nearly £25 billion of consumer spending across the economy this year.

The report surveyed 2,000 people in May and revealed that over a third of households are facing financial difficulties and planning to cut back on discretionary spending. Meanwhile, 25% of families said they are currently financially sound but will reduce their spending as a precaution.

UK Households are cutting down on non-essential items to manage their expenses.

Image source: Syda Productions, Shutterstock

Another quarter of households recognised the need to reduce their spending on non-essential items but preferred to borrow or dip into savings. On the other hand, 14% have no plans to cut back on spending.

The report added that around 32% of people plan to reduce most of their spending, while 28% intend to do so across all areas to counterbalance the sharp rise in prices.

Cutting back on expenses will mean switching to cheaper brands or discounters, buying in bulk, or availing of loyalty schemes or vouchers for most households. However, lower-income people have to take more extreme measures, like eating less.

The research also revealed that with the rising cost of living, around two-fifth of people expect an impact on their spending habits until at least the end of the next year.

Amid the cost-of-living crisis and decreasing consumer spending, investors can keep an eye on the following FTSE-listed stocks that may get impacted.

Burberry Group Plc (LON: BRBY)

An FTSE 100 constituent, Burberry Group Plc enjoyed a market cap of £6,512.67 million as of 19 July 2022. The British luxury fashion house hasn’t performed well over the past 12 months, with both its one-year and YTD returns in the negative territory at -15.36% and -8.42%, respectively. The company’s shares were trading at GBX 1,663.00, up 1.22% at 11:09 AM (GMT+1) on 19 July. 

J Sainsbury Plc (LON: SBRY)

J Sainsbury Plc on 19 July was up by 0.28% at around 11:12 AM (GMT+1) and was trading at GBX 216.10. The stocks of the UK’s second-largest supermarket chain have performed poorly over the last year. Both its yearly and YTD returns are currently in the negative territory at -24.08% and -21.63%, respectively. 

Frasers Group Plc (LON: FRAS)

The FTSE 250 constituent, Frasers Group Plc, is a retail and intellectual property group boasts of a market cap of £3,459.63 million as of 19 July 2022. The stock has provided a decent return of 23.06% over the past year. However, its YTD has not given much to cheer about with it being placed at -5.19%. The company’s shares were trading at GBX 731.00, up by 0.90% at around 11:15 AM (GMT+1) on Tuesday.

Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.

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