Retail spending likely to slump in 'golden quarter': Stocks to eye

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Retail spending likely to slump in 'golden quarter': Stocks to eye

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 Retail spending likely to slump in 'golden quarter': Stocks to eye
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Highlights

  • UK shoppers are expected to spend £4.4bn less on non-essentials items during the Christmas period.
  • 60% of shoppers are expected to lower their spending on non-food items in the golden quarter, as per Retail Economics and Metapack.
  • Majority of the retailers generate maximum profits during the golden quarter.

With the cost-of-living crisis spiralling in the country, UK shoppers are expected to spend £4.4bn less on non-essential items during the Christmas period, representing a decline of 22%.

Over the last three months of the year, generally referred to as the golden quarter, approximately 60% of shoppers are expected to lower their spending on non-food items, as per a study conducted by Retail Economics with retail technology firm Metapack. This is the quarter in which the majority of retailers generate maximum profits.

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The projections come as businesses in the UK are experiencing a huge pressure due to the soaring energy bills, along with rising costs of materials as well as labour. Several businesses have no other choice but to slash their trading hours due to the pressures.

Richard Lim, CEO of Retail Economics, said that inflation is set to surge at precisely the wrong time for retailers. With inflation hitting record highs, the budgets of consumers are already under enormous pressure.

Amid the struggles to make ends meet, households have no choice but to cut back on spending, which would negatively impact retailers. The profit margins of retailers have already been hurt due to rising cost pressures, and the decline in consumer spending would potentially make it worse.

Supermarkets have already been witnessing shoppers reducing their weekly spending, scrapping the little additions and turning to cheaper own-label items, or discounters, to save money. Amid these developments, UK investors can assess the performances of the following supermarket stocks.

Tesco plc (LON: TSCO)

Tesco plc is a worldwide operating retailer of groceries and general merchandise. TSCO shares witnessed a rise of 0.53% on Tuesday morning at 8:40 AM (GMT+1), at GBX 210.00. The company’s return on YTD (year-to-date) basis stands at -27.46% as of 4 October. Meanwhile, its one-year return stands at -15.18%. At the time of writing, the FTSE 100 constituent's market cap stood at £15,567.18 million. It has a positive EPS (earning per share) of 0.19 and its turnover (on book) stands at £2,402,151.40 at present.

J Sainsbury plc (LON: SBRY)

J Sainsbury plc is the second biggest group of supermarkets across the country. SBRY shares were experiencing a surge of 1.47% on Tuesday morning at around 8:40 AM (GMT+1), at GBX 179.15. The company’s return on a YTD basis stands at -35.11% as of 4 October. Meanwhile, its one-year return stands at -37.10%. The market capitalisation of the FTSE 100 constituent stood at £4,139.34 million at the time of writing. The company has a positive EPS of 0.30, and its turnover (on book) stands at £959,691.47 at present.

Marks and Spencer Group plc (LON: MKS)

Marks and Spencer Group plc is a UK-based retail company operating across the globe. MKS shares rallied by 3.87% on Tuesday morning at around 8:40 AM (GMT+1), at GBX 103.00. The company’s return on a YTD basis stands at -55.68% as of 4 October. Meanwhile, its one-year return stands at -43.53%. At the time of writing, the market capitalisation of the FTSE 250 company stands at £1,947.54 million. The retailer has a positive EPS of 0.16, and its turnover (on book) stands at £633,794.67 at present.

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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