Robust earnings of Games Workshop and Moonpig amid fall in UK’s July retail sales

Summary 

  • Retail sales in the United Kingdom saw a marginal dip in July 2021. Still, sales numbers are in line if compared with the pre-pandemic levels as per the Confederation of British Industry.
  • Demand in the retail sector looks sustainable, and sales growth could pick up once again in August month.

Britain’s retail sales volume dipped marginally in July month as per the trades survey data by the Confederation of British Industry (CBI). The retail sales volume rose by 23% in July, a slight dip compared to a 25% rise in June 2021, which was the first month when non-essential shops were operational after the ease in restrictions.

Economist at CBI said growth in the advance order book was at its fastest pace since December 2010, and July’s reported sales numbers are back at the expected levels when compared with the pre-pandemic period of 2019. CBI forecast the sales growth to pick again and touch a new high in the month of August.

Although the demand in the retail sector is relatively high because of high household savings due to lockdown, the overall retail segment is still facing significant labour shortage issues. Throughout the supply chain, many staff have to self-isolate themselves if they show the Covid-19 symptoms. The survey also found out that the stock levels were at a record low for the second consecutive month. The wholesale, retail, and motor trades sectors reported relatively low stock levels.                      

Let us focus at 2 FTSE listed retail stocks:

Moonpig Group Plc (LON: MOON)

The London-based company operates the online business model for selling personalised greeting cards and gifts. The company operates under the Moonpig brand in the United Kingdom, United States, and Australia and has another brand Greetz in the Netherlands. The company offers its products and services through a website and app with an extensive range of cards, personalised gifts, and next-day delivery, which has helped the Group retains its loyal client base. 

The company, in its results for the year ended 30 April 2021, stated that the group revenue was up by a record 113% at £368.2 million (FY 20 revenue: £173.1 million), and adjusted EBITDA doubled to £92.1 million (FY 20 adjusted EBITDA: £44.4 million). However, the company’s net debt rose by 307% to £115.1 million during the same period. The company delivered close to 50.9 million orders, with the mobile app accounting for 37% of total orders.

The company management expects the customer purchase frequency to slow down post lifting of lockdown restrictions until it stalls at 5% ahead of pre-Covid-19 levels. Hence the company expects revenue of around £250m to £260m in FY22, a lower estimate than the current year’s revenue.

The company’s stock trades at GBX 382.40, down by 0.68% on 28 July at 8.40 GMT+1 with a market cap of £1.31 billion.

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Games Workshop Group Ltd (LON: GAW)

The company designs and manufactures miniature figures and games. It operates its business through various distribution channels like trade, retail, and online segment.  The company operates 531 stores in 23 countries, and its stock is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.

The company declared its annual result for the year ended 30 May 2021. The reported sales grew by 34% at £361.0 million (2020 revenue: £269.7 million) with operating profits at £155.7 million, and earnings per share stood at 372.7p per share. The company also declared a dividend of 40p per share for its shareholders, with an ex-dividend date of 6 August 2021.

Shares of Games Workshop Group Ltd trades at GBX 11,390, down by 2.24% on 28 July at 8.40 GMT+1 with a market cap of £3.66 billion. The stock has given 35.30% returns to its shareholders in the last one year.

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