UK consumer confidence declines: Are these 3 retail stocks worth holding?

Highlights 

  • Sainsbury’s total retail sales (excluding fuel) rose by 1.6%, and grocery sales increased by 0.8% in the quarter ended 26 June 2021.
  • Recently, Morrisons announced plans to cut down its online delivery service as consumer behaviour returns to pre-pandemic trends.
  • WH Smith group for the H2 ending 31 August 2021 was 65% of 2019 total revenue.

Consumers in the UK are increasingly worried about next year due to rising prices and increasing COVID cases. The GfK Consumer Confidence Index declined for a third consecutive month to minus 17 in October, reaching record low levels since February. Last month, the figures had dropped to minus 13.

Increasing fuel and food shortages, rising inflation and interest rates and growing COVID-19 cases are impacting consumer confidence. The gloomy consumer confidence outlook is expected to impact big-ticket purchases for the holiday season. Below is a detailed review of 3 retail stocks - J Sainsbury Plc, Morrison (Wm) Supermarkets Plc and WH Smith Plc and how may the lower consumer confidence impact their business prospects.

Sainsbury, Morrisons & WH Smith: Market cap & one year return

(Data source: Refinitiv)

J Sainsbury Plc (LON: SBRY)

Sainsbury is a leading supermarket chain in the UK. The retailer announced the closure of its store in Craigavon and is expected to put over 100 workers jobs at risk.

Sainsbury’s total retail sales (excluding fuel) rose by 1.6%, and grocery sales increased by 0.8% in the quarter ended 26 June 2021. Its online grocery business registered 29% growth during the quarter. The company expects underlying profit before tax to reach £660 million for the financial year ended March 2022.

The shares of Sainsbury last traded at GBX 296.20, down by 0.34% at the close of trade on 21 October 2021. The market cap of the company stands at £6,931.90 million. The shares of the company gave a return of 44.91% to shareholders in the last one year.

Morrison (Wm) Supermarkets Plc (LON: MRW)

Morrisons is a company that operates a chain of supermarkets across the UK. The company recently accepted a £7 billion take over bid from Clayton, Dubilier & Rice (CD&R). The company also announced plans to cut down its online delivery service as consumer behaviour returns to pre-pandemic trends and growing in-store footfall.

Morrisons’ total revenue, including fuel, increased by 3.7% to £9.05 billion for H1 ended 1 August 2021 compared to £8.73 billion in the previous year. Its statutory profit before tax was reduced by 43.4% to £82 million in H1 2021 compared to £145 million in H1 2020. The company expects profit before tax for the year 2021/22 to be higher than £431 million achieved in 2020/21.

The shares of Morrisons last traded at GBX 286.00, up by 0.14% at the close of trade on 21 October 2021. The market cap of the company stands at £6,910.27 million. The shares of the company gave a return of 65.37% to shareholders in the last one year.

WH Smith Plc (LON: SMWH)

WH Smith is a UK-based retailer that operates a chain of stores at railway stations, airports, hospitals and service stations. WHSmith announced the closure of its high street retail store in Gillingham in the New Year.

WH Smith group for the H2 ending 31 August 2021 was 65% of 2019 total revenue. While in the high street, the total revenue of the company in H2 was 85% of 2019 levels.

The shares of WH Smith last traded at GBX 1,542.50, down by 1.37% at the close of trade on 21 October 2021. The market cap of the company stands at £2,047.41 million. The shares of the company gave a return of 60.64% to shareholders in the last one year.

Comment


Disclaimer